HVAC Residential Market / HVAC Light Commercial Market / HVAC Commercial Market

Election Outcome and Industry Implications

July 23, 2012
Severe partisan politics and policy gridlock have characterized Washington during the last two years. As a result, passage of an energy policy, which was high on the Obama Administration’s list of priorities when the president took office in 2008, has stalled. And things are not likely to change during the 2012 campaign, as partisan politics continue to hinder progress and economic issues, both domestic and foreign, overshadow the energy discussion. But what happens after the election? What impact will election results have on energy efficiency in general and the HVACR industry in particular?

First of all, don’t look for a radical change in the political landscape. As votes are tallied, it is unlikely that one party will gain enough advantage to dominate the House, Senate, and Administration and usher in a landmark energy policy. In the House, a few seats may shift from one party to the other, but at the end of the day, Republicans will most likely retain leadership.

Political pundits believe it’s a toss-up on which party will have the majority of the seats in the Senate. If Republicans win control of the Senate, neither party will have the 60 percent cloture majority required to stop debate and pass an agenda. As a result, passage of any bill in the Senate will require bi-partisan support.

Looking at the presidential candidates, the differences between them are probably not as great as their opponents would portray them — at least where energy is concerned. Both President Obama and Governor Romney understand the impact of energy efficiency as it relates to the economy. In fact, energy policy may be one of the few areas where politicians in Washington can agree, at least to some extent, as evidenced by several bills recently introduced, albeit not yet passed, in Congress:

• S.1000 Shaheen-Portman Bill: This strongly bipartisan bill, which passed out of the Senate Energy committee on an 18-3 vote, would boost private sector investment in building efficiency upgrades, strengthen voluntary national model building codes, provide energy efficiency financing options for manufacturers, and require the federal government to improve its energy management. The bill is cost-neutral to the federal budget.

• H.R. 4230 HOMES Act: This bi-partisan House bill would incentivize homeowners to undertake comprehensive energy-saving improvements by establishing a re-bate program to help homeowners finance efficiency retrofits.

• H.R. 4017 Smart Energy Act: This is another bi-partisan House bill that would reduce barriers for government, businesses, and consumers seeking to adopt off-the-shelf energy-efficient technologies that will save them money.

However, despite bipartisan agreement on the need to increase energy efficiency and garner support for these bills, the approaches the two parties typically take to secure increased efficiencies differ and will most likely continue to do so. Republicans focus on the national security, energy security, and economic aspects of energy policy, with a tendency to downplay environmental issues. It’s worth noting that we have seen strong energy policy measures emerge under recent Republican presidents. What’s more, Governor Romney invested heavily in energy policy in Massachusetts. Nevertheless, a Republican administration might mean fewer regulations and tax credits.

Democrats, on the other hand, often focus more on the environmental and consumer protection aspects of energy policy, also recognizing national economic and security issues. If the Democrats retain office, we can expect to see continued gridlock in Congress, which would lead to administrative agencies such as the Department of Energy (DOE) becoming much more aggressive, with a clear focus on energy efficiency.

Energy Efficiency

Despite their philosophical differences, there is considerable common ground between Republicans and Democrats when it comes to accelerating the movement to improve energy efficiency. In the area of refrigerants, cap-and-trade continues to be a controversial — and partisan — issue and will likely die unless Democrats gain control of the administration and both houses of Congress. This represents a remarkable political turn-around, since the cap-and-trade concept emerged during the first President Bush’s administration, as an effective, market-based approach to reduce sulfur oxide (SOX) and nitrogen oxide (NOX) emissions from utility power plants.

Turning to tax policy, the expiration of Section 179D of the Internal Revenue Code, which provides federal tax deductions to commercial building owners who make energy-reducing investments in their new or existing properties, was extended to Dec. 31, 2013. But efforts to create more effective or additional tax credits have been slow to materialize. This is one of those measures that would expand with Democratic control of Congress, or contract with Republican control.

Opportunities abound to encourage investment in building efficiency upgrades, beginning with expanding both the DOE Loan Guarantee Program and use of Energy Savings Performance Contracts by federal agencies. Requiring the federal government, the country’s single largest energy user, to adopt energy-saving techniques for computers, better building standards, and smart metering technology could also improve building efficiency while passing energy and taxpayer dollar savings to the consumer. Additionally, establishing collaborative research partnerships within DOE to promote research and the commercialization of innovative manufacturing processes could help manufacturers reduce energy use and become more competitive.

Regardless of who wins, we face a lame duck session following the election, which has the potential to be a period to get things done and pass legislation that otherwise might have been hung up by partisan gridlock. But we cannot afford to wait until then. A message should be delivered to politicians in Washington today — one that clearly states that their constituents can no longer tolerate the inaction on energy policy of the past two years. Politicians need to find a way to govern from the middle and seek consensus building. Only then can they effectively reduce the federal deficit while creating jobs and spurring our economy and our country forward during the next four years and decades to come. And if they cannot, they may find they do not have jobs to return to in January.

Publication date: 7/23/2012
 

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