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ENERGY

Obama Changes His Tune

'Shellacking' sends the president running from some promises.

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(Mark Wilson/Getty Images)

When it comes to energy policy and President Obama’s rhetoric, what a difference eight months and a “shellacking” on November 2 makes.

“The only way the transition to clean energy will ultimately succeed is if the private sector is fully invested in this future—if capital comes off the sidelines and the ingenuity of our entrepreneurs is unleashed,” Obama told a crowd at Carnegie Mellon University in Pittsburgh, in June. “And the only way to do that is by finally putting a price on carbon pollution.”

 

Fast forward to today. Obama is placing his bets on a clean energy standard, clean technology research and development, and energy efficient buildings as a way to spur a green economy. Gone are the calls for a price on carbon emissions.

“Clean energy breakthroughs will only translate into clean energy jobs if businesses know there will be a market for what they're selling,” Obama said in his State of the Union address last week. “So tonight, I challenge you to join me in setting a new goal: By 2035, 80 percent of America's electricity will come from clean energy sources.”

Since then, Obama has traveled to Wisconsin and Pennsylvania to tout his clean-energy agenda.

 

“Our homes and our businesses use 40 percent of the energy,” Obama said at Penn State University today when announcing his administration’s initiative to make buildings more energy efficient. “They contribute to 40 percent of the carbon pollution that we produce and that is contributing to climate change. It costs us billions of dollars in energy bills. They waste huge amounts of energy.”

Obama’s first choice to invigorate a clean energy economy was through a cap-and-trade system. But its collapse in Congress last year was largely due to the Republicans’ successful attack on it as a jobs-killing energy tax, and it has forced the White House to shift gears.

“Cap-and-trade was just one way of skinning the cat; it was not the only way,” Obama said the day after Republicans took the House and gained seats in the Senate. “It was a means, not an end.  And I’m going to be looking for other means to address this problem.”

That "other means" has turned out to be a clean energy standard. A CES has always operated in the shadow of a renewable energy standard. A RES is more restrictive since it includes only renewable energy like wind and solar. A CES includes “clean coal” technology and nuclear power and, in Obama’s proposal, natural gas.

 

In 2007 when the Senate was voting on a RES, Republicans countered it with a CES. Neither of them became law. Last Congress, Republican Sens. Richard Lugar of Indiana and Lindsey Graham of South Carolina introduced different versions of a CES while a RES remained at the forefront of the debate. Republicans prefer a CES, but given a choice between a CES and nothing, a large number of them would choose nothing.

And that’s precisely the situation Obama and Congress find themselves in. The GOP-controlled House seems hostile to any type of federal mandate, especially given the clout of those affiliated with the tea party.

Senate Republicans are more open to a CES. But the inclusion of natural gas, the changed membership of the Energy and Natural Resources Committee, and other political changes since last Congress will make a CES at least as difficult to pass as a RES.

When Senate Majority Leader Harry Reid, D-Nev., abandoned efforts to pass a cap-and-trade bill, the RES went down with it. And despite efforts by Energy and Natural Resources Committee Chairman Jeff Bingaman, D-N.M., and others to revive it, it remained buried along with cap-and-trade. The politics of a RES and a cap-and-trade bill are similar, and a CES should prove no different.

The policies of these three proposals are also similar. The end goal of each of them is to incentivize clean energy, thus stimulating the private sector to invest in it. Cap-and-trade does that through a market-based system while the other two create mandates.

“One of the things that happens implicitly when you set a standard is that you have in fact put a price on carbon, but it’s the clumsiest way to do it,” said Kevin Book, managing director at ClearView Energy Partners, an energy consulting company. “You’re not looking for an efficient, market-based solution. You’re looking for just enough to meet the standards solution.”

Whether or not Obama’s CES will stimulate clean energy the way an explicit price on carbon emissions would remains to be seen. The critical details of his proposal still need to be hashed out. Key questions like how much credit natural gas receives and whether there will be tiered levels for different types of energy will determine how successful Obama is at making the less-attractive method (a standard) work to incentivize clean energy rather than what economists say is the most attractive method (cap-and-trade).

“If you foreclose a market approach to this problem, you are essentially left with a mix of standards, subsidies, and command-and-control regulation,” said Paul Bledsoe, senior adviser at the Bipartisan Policy Center and a climate and energy expert in the Clinton administration. “That is your universe if you take the approach most economists—conservative or progressive—favor off the table.”

This article appears in the February 4, 2011 edition of NJ Daily.

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