On Tuesday both the United States Vice President's office and the nonpartisan Congressional Budget Office issued separate reports about the impact of the Recovery Act of 2009.

In general the CBO report was favorable. Its estimates of how much the Recovery Act will increase deficits over 10 years increased by some $27 billion compared to its original estimates (issued when the law was passed), but it concluded that the economy would be worse off without the stimulus package. It also estimates that the law increased gross domestic product by between 1.7% and 4.5% in the most recent quarter (from April to June). And that the law lowered the unemployment rate by between 0.7 percentage points and 1.8 percentage points and increased the number of people employed by between 1.4 million and 3.3 million.

The Vice President's report was even more positive. It claimed, for example, that because of Recovery Act investments the US is on track to cut the cost of solar power in half by 2015. It also claimed that, "With $8 billion dollars in funding, the Recovery Act is beginning to make high-speed rail reality across the country." That might be a stretch. High-speed rail will require billions more in non-federal investment to become a reality.

The Recovery Act has indeed helped kick start significant research projects and led to the groundbreaking on several factories for advanced energy products. But to meet its long-term goals of creating a strong and vibrant economy based on clean energy, what's most important is not necessarily what's happened so far, but what will happen in the next couple of years. Will the investments started with the Recovery Act continue? Or will they dry up under budgetary pressures? What's more, will incentives be put in place, such as a price on carbon, help drive market adoption of new green technologies?

For a close analysis of the impact of the Recovery Act, check out this review in the current issue of Technology Review magazine.

A long-awaited energy bill was unveiled today by its Senate sponsors, John Kerry (D-MA) and Joseph Lieberman (I-CT). According to a summary (pdf) of the bill, it would reduce carbon emissions by 17 percent by 2020 and by over 80 percent by 2050 by putting limits on the amount of carbon dioxide emissions from power plants and heavy industry, and from producers and importers of refined fuels for transportation.

The limits will only apply to those who emit over 25,000 tons of carbon dioxide a year, which works out to about 7,500 factories and power plants, according to the summary. These emitters will have to purchase emissions allowances, cut emissions, or both to meet the targets. Those who pollute less than their allowances can sell them to others in a market-based system.The proceeds from buying the allowances will be divided up--some will go to pay down the deficit; some will fund research and development; some will go to businesses to help them meet the caps; and the rest will be mailed to taxpayers in the form of a refund check. As the years go by, more of the proceeds will go directly to taxpayers.

The plan is very similar to the cap and trade system in a bill the House passed last year, except that one didn't involve sending out refund checks (although there were provisions to help out poor people who are affected by higher energy bills). The new bill also only covers parts of the economy, rather than the whole thing.

Numerous provisions cater to different interests. It supports offshore drilling but lets states opt out. For those worried that a cap on carbon emissions will hurt the coal industry, the bill contains support for capturing and storing carbon from coal plants, which could help them meet the caps. Supporters of natural gas will find tax incentives for people to switch to natural gas powered vehicles, as well as other subtle changes that will make it more attractive to build natural gas power plants. Industries affected by the cap get a couple of boons. First, factories (not power plants) don't get regulated until 2016, and the money from the purchases goes back to them to help them pay for switching to cleaner technology. They also are protected by trade provisions designed to keep business from moving to countries without caps on carbon. Farmers are exempt. And they'll make billions with carbon offsets--such as planting trees that absorb and store carbon dioxide. Nuclear gets $54 billion in loan guarantees, as well as "risk insurance" to help get new power plants financed. There will also be money to promote battery-powered cars.

Renewable energy, carbon capture, and energy efficiency researchers should be happy. Money from the allowances and direct government funding will help extend R&D funding launched by the stimulus package last year.

The summary is careful to emphasize that Wall Street won't make money by buying and trading carbon allowances because of strict regulations. But it didn't mention how much this is likely to increase energy bills.

Now the sponsors have to start gathering votes. We'll soon see if they've spread enough incentives around first to get it taken up on the Senate floor, and then maybe even passed.

The Cape Wind offshore wind project, which could be the first built in the U.S., has been approved by U.S. Interior Secretary Ken Salazar. The decision, announced today, comes after nearly 10 years of political opposition, environmental reviews, and most recently objections from local Indian tribes.

Because of these objections, Salazar is requiring that the project be scaled back from 170 wind turbines to 130 wind turbines and that the developer conduct more marine archeological surveys. He is also requiring "other steps" to make them less visible, such as the coloring of the turbines and their lighting.

Salazar acknowledged that the permitting process was a mess. "There's no reason an offshore wind permit should take a decade," he said. He's working on streamlining the process.

Lawsuits could yet delay the project further. But Salazar thinks these can be overcome. "We are very confident that we will be able to uphold the decision against legal challenges that might be filed," he said.

Massachusetts Governor Duvall Patrick says construction could begin within a year.

Salazar presented the project as a way to help the United States keep up with other countries' efforts on offshore wind, such as European countries and China. But it might not make sense to "keep up" in this area. Although offshore winds provide an enormous potential resource, there are much cheaper places to generate wind power in the United States. It might make more sense to let other countries drive down costs of offshore wind while focusing on developing the cheapest possible on-shore wind power.