I know, I know, that is blasphemy from the guy who has oft been quoted as saying that, when it comes to the Congress, “it is better to get nothing done than to get the wrong thing done.” But here’s the deal, and I will put this bluntly…we’re fucked! We need to change our direction on energy and change it now. If you consider how difficult it will be to get politicians who receive millions of dollars in campaign donations from major polluters to vote against their own self interest, then to truly blaze a new path there has to be some give and take. In an ideal world, this would never be the case, but in reality we have a lot of work to do and getting started in that direction is a necessity. That being said, let’s take a look at this highly nuanced and intelligent plan and discuss what positive and negatives come from it, and whether such negatives are necessary evils.
First and foremost, the plan contains some lofty aspirations. From providing relief from high gas prices to developing renewable resources, the plan has far reaching goals. According to the Obama team, his plan will achieve the following:
• Provide short-term relief to American families facing pain at the pump
• Help create five million new jobs by strategically investing $150 billion over the next ten years to catalyze private efforts to build a clean energy future.
• Within 10 years save more oil than we currently import from the Middle East and Venezuela combined
• Put 1 million Plug-In Hybrid cars – cars that can get up to 150 miles per gallon – on the road by 2015, cars that we will work to make sure are built here in America
• Ensure 10 percent of our electricity comes from renewable sources by 2012, and 25 percent by 2025
• Implement an economy-wide cap-and-trade program to reduce greenhouse gas emissions 80 percent by 2050
It is easy to make such claims; McCain, afterall, has said that he will just come up with one hundred something billion dollars tomorrow if need be (without explaining how). The real question, then, is whether Obama’s plan is viable and beneficial.
SHORT-TERM SOLUTIONS
On the question of providing immediate relief at the pump, the plan calls for an emergency energy rebate, a crackdown on oil speculators, and a release of light crude oil from the strategic reserve (with intention of later replacing it with heavy crude oil) to lower oil prices. While the first two are an excellent idea no doubt, the notion of lowering prices by releasing oil from the Strategic Petroleum Reserve may not be the best plan.
Although it is not explained exactly how the rebate will be implemented, the plan calls for an emergency energy rebate to be paid directly to individuals ($500) and married couples ($1000) by requiring oil companies to pay it out of “their record-breaking windfall profits.” Now this is an idea I can get behind. Basically, the government would levy a windfall profits tax against oil companies. It seems only fair considering that while we are all paying more at the pumps, Exxon is reporting second-quarter earnings of $11.68 billion, the largest profit by any U.S. corporation EVER.
Second, the plan seeks to end rampant oil speculation by closing loopholes in the Commodity Futures Trading Commission regulations and increasing transparency on the speculative market. Sounds good. Transparency is always a plus.
Third, Obama calls for a drawing down of the Strategic Petroleum Reserve (for those unfamiliar with the SPR, this report contains an excellent explanation and history of it.) As the aforementioned report nicely lays out, the Energy Policy and Conservation Act (EPCA) of 1975 allows for a drawdown of the Reserve if the President finds that there is an interruption in the energy supply that creates the following conditions:
(a) an emergency situation exists and there is a significant reduction in supply which is of significant scope and duration; (b) a severe increase in the price of petroleum products has resulted from such emergency situation; and (c) such price increase is likely to cause a major adverse impact on the national economy.
Later, in 1990, Congress amended the EPCA to allow for the President to drawdown from the SPR for a short period without declaring such an emergency and granted the President the authority to “loan” oil from the SPR as long as it is returned with a “premium” of additional oil.
Thus, Obama is seeking to do the latter, with the premium being that light crude is being replaced with heavy crude. Although I don’t say this very often, I think this might be one time where I agree with President Bush that this is a bad idea. While an immediate addition of more oil could lower gas prices, it also may have no impact at all. The oil companies are already making record profits, and yet we have seen no benefit. I am afraid I have to say I agree with the President when he asserts that drawing down the SPR in the absence of a severe energy disruption is contrary to the purpose for which the SPR was created and will simply make our nation more vulnerable to a supply interruption. Of course Obama is only attempting to implement the bill that was offered to the House of Representatives by Democratic Reps. Lampson and Markey (H.R. 6578 Strategic Petroleum Reserve (SPR) Drawdown and Swap) and failed to pass on the House on 24 July (although Mr. Kucinich voted in favor of it, so maybe I should reconsider my opinion). One key reason why I do not think this should be done, other than the above mentioned notions, is that studies are already showing that people are adapting to high gas prices, in such ways that could provide long term benefits. We need major changes in the way we treat gasoline. I myself have been walking and using the bus much more than I ever did in the past. Considering how minimal the short term benefits would be, this solution is likely not the answer. Rather than drawing from the SPR, it may be a better idea to levy a larger tax upon windfall oil profits to provide more direct benefits to consumers…or how about some price controls and nationalization of any companies found guilty of price fixing? That may be extreme, but would certainly prevent such future abuses and may be entirely legal.
MID-TERM & LONG-TERM SOLUTIONS
According to the plan, the two major issues facing the nation in the long term are global warming and the U.S. dependence on foreign oil. According to Obama, it is a “moral, environmental, economic, and security imperative” for the United States to tackle these issues in a sustainable manner. He seeks to do this by addressing climate change, investing in energy while creating new jobs, making our automobiles fuel efficient, promoting the domestic energy supply, diversifying energy resources, and committing to reduce energy consumption and cost.
Climate Change
Obama seeks for the United States to address global climate change by implementing a cap-and-trade program to reduce greenhouse gas emissions and by re-engaging the UN Framework Convention on Climate Change (UNFCC) and bringing nations together to find an effective solution to reduce emissions. It is about time that the U.S. become a leader on fighting pollution again; rejoining UN efforts to curb global warming and introducing a cap-and-trade system that has worked in Europe and was recently adopted by British Columbia is a step in that direction.
Investment in Technology and Clean Jobs
The plan seeks to use money raised from the cap-and-trade auctions to invest in basic research, technology demonstration, and aggressive commercial deployment and Clean Market creation. $150 billion will be invested over 10 years to:
accelerate the commercialization of plug-in hybrids, promote development of commercial scale renewable energy, encourage energy efficiency, invest in low emissions coal plants, advance the next generation of biofuels and fuel infrastructure, and begin transition to a new digital electricity grid.
This will allow for the creation of a new, highly skilled workforce that can fill the estimated 5 million new green jobs that will be created by the plan. This new workforce will include veterans, as money will be invested in counseling and education for said veterans in the field, along with the creation of “career pathways” and “educational programs” that within the industry. Training Programs would also be implemented for the general population. Furthermore, the plan seeks to create a federal grant program that allocated money “to the states to identify and support local manufacturers with the most compelling plans for modernizing existing or closed manufacturing facilities to produce new advanced clean technologies.”
While this is quite an arduous task, taking action in this way would certainly help pave the way for a greener future. It would also create jobs that are much needed in our country. Too often professional jobs are being replaced with jobs in the service industry; here is a chance to create new jobs and help the environment at the same time. I am in.
Fuel Efficiency
The plan also seeks to create greater fuel efficiency by increasing fuel economy standards, developing advanced vehicles (including putting one million plug-in electric cars on the road by 2015), partnering with domestic automakers, mandating that all new vehicles are flex-fuel, developing sustainable biofuels and the infrastructures to support them, and establishing a National Low Carbon Fuel Standard (LCFS). This all sounds great. The only snag could be the resistance of automakers (for an amazing discussion of this, go rent the documentary Who Killed the Electric Car?). However, the plan seeks to alleviate such concerns by providing $4 billion in tax credits and loan guarantees for domestic automakers so that fuel efficient cars can be built in plants in the United States. Again, ambitious, but all of these things are sorely needed.
Domestic Energy
The plan further calls for increased production of oil and gas domestically (without opening areas that are currently protected). This includes offshore drilling and working with the Canadian Government to construct the Alaskan Natural Gas Pipeline. Further offshore drilling would seem not only to be a mistake, but is a complete reversal of statements that Obama has made in the past. Apparently he now agrees with President Bush, who only a few weeks ago lifted the executive ban on offshore drilling that was officially banned by the executive order of his own father in 1990. The last thing we need is to further our dependence on oil. Sure this may slightly change our dependence on foreign oil, but it will not have any sort of immediate impact. Maybe this is Obama reaching across the aisle in a nod to his Republican counterparts, but embracing the idea as a whole seems like a bad idea. However, if it gets the Republicans to vote in favor of the rest of the plan, then by all means, we can give a little if it will result in a long term solution that does not include off shore drilling.
Diversification of Energy Reources
The plan that Obama puts forth rightly notes that we need to diversify our energy sources, rather than simply relying upon one new technology. In order to do so, he proposes requiring that 10% of electricity must come from renewable sources by 2012, developing clean coal technology, and only allowing expansion of nuclear energy if it is safe and secure (which includes developing safe ways to store the waste already out there). Clean coal may be an oxymoron, but it is a move in the right direction. Enough said.
Reducing Energy Consumption and Cost
Finally, the plan calls for making the U.S. the most energy efficient nation in the world. He first seeks to do this by setting an aggressive energy efficiency goal of reducing electricity demand by 15% from the Department of Energy’s current projected levels by 2020. According to the plan, this will save consumers $130 billion and reduce carbon emissions by over 5 billion tons by 2030. Furthermore, he would require that all new buildings be carbon neutral by 2030, overhaul federal efficiency standards for appliances, and reduce federal energy consumption (as “the federal government is the world’s largest single consumer of energy in the world”). Finally, the plan would allow for incentives paid to utilities that implement green changes, make a major investment in the nation’s energy grid to allow it to be more efficient through the creation of a Smart Grid, aid in the weatherization of American homes, and build sustainable communities that are built around bicycles and other alternative transportations.
Maybe it is just me, but this last part of the plan seems the most ambitious. While changing standards, modernizing the power grid, and creating new incentives are done easily enough, the creation of sustainable communities may be the most difficult (and, in the end, if carried out, it could also be the most effective solution). While the higher gas prices have caused people to resort to alternative means of transportation already, there are areas of the country where the notion of public transportation is nonexistent, let alone the ability to travel via bicycle or foot. This would require a major investment in infrastructure and safety measures. However, cost aside, doing so can only be beneficial.
This analysis is by no means complete. It was a large task to undertake, and the longer I was at it, the more taxed my brain became…but as a whole I have to say: The Obama Energy Plan may have some parts with which I disagree, and may be extremely difficult to implement, but it is this sort of radical change that is needed. If we all embrace such changes, such a plan may just work. And then we can leave this planet in a better state than it was when we found it, so that future generations may enjoy it.
Wow, that was a lot to cover. I hope that it can help you develop your own opinion on the policy that Obama is putting forth. Next time I will tackle John McCain’s energy plan (THE LEXINGTON PROJECT: An All of the Above Energy Solution).
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