The price of oil is inexorably on the rise, fueled by an insatiable demand from China and India that’s set to soar in the coming decade. Projections show that the years ahead will bring unpredictable spikes in oil and gasoline costs that will strain household budgets and kneecap economic growth. Fossil-fuel emissions are also increasing, spewed daily from cars, power plants, and factories—all of which scientists say are leading to a warming planet, rising sea levels, increased flooding, longer droughts, and stronger, more-devastating storms.
The world’s economies are engaged in a fierce technology race to solve the problems of oil dependence and climate change. The first to come up with commercial-scale solutions will have an advantage in the global economy, although any technological fixes are unlikely to go mainstream without some kind of government help.
In the United States, the energy-production landscape has exploded. Advances in the technology of hydraulic fracturing, also known as “fracking,” have unlocked vast oil and natural-gas resources. That’s great news in the quest to reduce U.S. dependence on foreign oil, but it opens up a world of questions and fears that fracking could contaminate water supplies and even cause earthquakes. A storm is brewing over how to safely regulate the technology without freezing what could be a domestic-energy bonanza.
Whoever wins the White House this fall will confront the increasingly urgent problems of a global energy economy and environment nearing dangerous tipping points.
President Obama, Mitt Romney, and the super PACs supporting their campaigns are well aware of the stakes; dozens of energy-themed speeches and attack ads have already hit the airwaves. Less certain is what each candidate would do about energy policy once in office. Obama has been clear about his commitment to tackling climate change, reducing U.S. oil demand, and ramping up clean-energy development, and he has flexed the muscles of the executive branch to bypass a querulous Congress and implement some of his policies. But if he wins a second term, he will face a challenge to enact major pieces of that vision, as Republicans continue to focus on slashing government spending and regulation. A second-term energy agenda would largely boil down to which piecemeal policy changes the president could move past major political hurdles.
For Romney, the question is which energy agenda he would bring to the White House: that of the Massachusetts governor who tasked his environment department with tackling climate change, or that of the candidate whose economic adviser has endorsed a carbon tax to stop global warming? Or would it be the mission of the candidate who, in response to attacks from the tea party, walked back his stance on climate change so far as to question whether human actions are to blame?
Even those closest to Romney aren’t sure.
In 2003, as governor of a solidly blue state, Romney won cheers from green groups when he appointed a team of officials with strong environmental records to oversee a muscular climate-change and clean-energy agenda. Among them was Gina McCarthy, a brusque, straight-talking expert in environmental regulation from South Boston; Romney appointed her undersecretary for policy at the Executive Office of Energy and Environmental Affairs and charged her with developing the state’s first climate-protection action plan. Activists celebrated when Romney established emissions caps for coal-fired power plants, openly slamming pollution at a speech in front of an aging coal plant in Salem, Mass. The governor declared, “I will not create jobs or hold jobs that kill people; and that plant, that plant kills people.” As governor, Romney also backed clean-energy spending—he was a cheerleader for a state renewable-energy trust fund that pumped tens of millions of dollars into solar and other clean-energy companies and programs under his watch.
In the 2008 GOP presidential primary contest, rival John McCain not only identified global warming as a problem but also touted his leadership as a chief author of the Senate’s first major climate-change bill. Romney took a similar position, and his campaign hired former George W. Bush economic adviser Greg Mankiw, who called for taxing fossil-fuel pollution to curb climate change. In his 2010 book, No Apology, Romney wrote, “I believe that climate change is occurring.… I also believe that human activity is a contributing factor,” although he added, “I am uncertain how much of the warming, however, is attributable to man and how much is attributable to factors out of our control.” In the book, however, he did praise Mankiw’s idea of an energy “tax swap”—taxing gasoline or carbon pollution in exchange for cutting taxes elsewhere.
But in 2012, even as the scientific consensus that fossil-fuel emissions cause global warming has further solidified, the political landscape has shifted in the opposite direction. Instead of running against McCain for the GOP nomination, Romney ran against a field of tea party-aligned conservatives, many of whom denounce the science behind climate change. The Supreme Court’s decision in Citizens United v. Federal Election Commission, the rise of super PACs, and the new pipelines for pouring money into campaigns have given fossil-fuel interests that oppose climate policy an outsized influence in the political process—and they made it clear that they would come after Republican candidates who endorsed climate-change policy.
So Romney, who as the head of investment firm Bain Capital was famous for making business decisions driven by data rather than ideology, reversed his former position that human action probably causes global warming, telling donors at a Pittsburgh campaign event, “My view is that we don’t know what’s causing climate change on this planet.” One former Romney adviser, who asked not to be named in order to speak candidly, called the shift on climate change a “watershed moment.” The about-face signaled, perhaps more than any other of his policy reversals, evolutions, or flip-flops, Romney’s willingness to follow political expediency to the point of abandoning previous positions, even one tied to scientific, evidence-driven data.
Romney’s repositioning on climate change has left even those closest to him uncertain about how he would govern on energy issues if elected. Mankiw, who endorsed the carbon-tax proposal, is still one of Romney’s chief economic advisers. But the candidate also hired as a top energy adviser Oklahoma oil billionaire Harold Hamm, who made his fortune in using fracking methods to extract oil and gas. Another major adviser is Jim Talent, a former senator from Missouri and a partner in the D.C. lobbying firm Mercury Public Affairs, which counts among its clients Peabody Energy, the largest coal company in the country. People close to the candidate say that a President Romney’s likely pick for chief of staff could be his friend Jack Gerard, the top lobbyist for the American Petroleum Institute, which represents the interests of big oil in Washington.
Romney’s campaign plan details a standard Republican energy platform: Increase oil drilling offshore and in the Arctic National Wildlife Refuge, roll back the Environmental Protection Agency’s regulations on coal-fired power plants and oil refineries, and slash government subsidies for renewable energy. In July, Romney drew fire from the renewable-energy industry—but also from Republicans in the windy states of Iowa and Kansas—when his campaign said that it would end a $1.2 billion annual production tax credit for wind energy. On climate change, Romney says he would strip away EPA’s authority to regulate carbon pollution.
“Which path would he pursue? It’s really hard to say,” said Jim DiPeso, policy director of the group ConservAmerica, formerly known as Republicans for Environmental Protection. “His record in Massachusetts is pretty good from our standpoint.… There’s a moderate streak there—I’m hopeful that elements of that will reemerge. But he can’t do too much of that, because then he’ll be attacked by conservatives.”
Obama campaigned in 2008 on progressive environmentalists’ dream platform: Attack global warming with a sweeping cap-and-trade program, create a national mandate for renewable-electricity production, and invest $150 billion over a decade in clean-energy research and development.
He has, for the most part, been faithful to that vision, even though he has been unable to enact much of it. The president pushed a cap-and-trade and renewable-electricity bill in Congress, but it died in the Senate, and Republican campaign strategists have since successfully turned support for cap-and-trade into political poison. Obama invested a massive $40 billion in federal spending on clean energy in the 2009 stimulus package—including the $535 million loan guarantee to solar company Solyndra, which subsequently went bankrupt, pretty much killing short-term prospects for federal clean-energy spending. In the wake of cap-and-trade’s demise in Congress, Obama has used his executive authority to push through EPA regulations on climate change, vehicle fuel efficiency, and clean air. Republicans have savaged the rules as “job-killing,” and industry interests and many state governments are suing to undo them. (In one sign of how far Romney has shifted from his former views, the official in charge of clean-air regulations in Obama’s EPA is the same Gina McCarthy who once helped Romney craft his climate-change plan.)
Last summer, Obama was on track to approve construction of the Keystone XL pipeline to import heavily carbon-polluting oil from Canadian tar sands, but after environmentalists staged White House rallies against the project, he rejected it—temporarily, at least.
As the president has come under attack from the right this campaign season, he has made some concessions to industry. Last August, he delayed a major EPA smog regulation to the delight of coal-plant owners, in part because the rule would chiefly affect power plants in 2012 election-battleground states. To the horror of many environmental groups, Obama is moving ahead with plans to allow Shell Oil to begin exploratory drilling in federal waters in the Arctic Ocean. As the fracking boom has begun generating thousands of new jobs, the Obama administration’s once-chilly relationship with the oil and gas industry has noticeably thawed—as signaled by EPA’s first round of rules regulating air pollution from fracking, which by and large found favor with drilling companies. This summer, as a devastating drought continues to parch the nation and July went down as the hottest month in U.S. history, Obama almost never mentions the words “climate change.”
Still, he has made it clear that he stands by the science that global warming is caused by fossil-fuel emissions and is an urgent problem. He proposes to address it mainly through policies that wean the United States from dependence on coal and oil and further the widespread use of new energy technologies such as solar, wind, and battery-powered cars.
The question for Obama, then, is not what his beliefs on energy and climate change are, but rather, given the political landscape and the failure of his biggest effort to transform energy policy, what would be politically possible for him to achieve in a second term.
Obama has also embraced a major push by the Pentagon to increase its energy efficiency and use of renewable energy as part of a strategic effort to cut fuel costs and save lives, after hundreds of troops and contractors were killed delivering fuel shipments in Afghanistan. While Republicans have attacked some specifics of that plan—particularly, the Pentagon’s request for increased spending on biofuels—much of the strategy still enjoys bipartisan support. In the absence of any comprehensive new energy policy, the Obama White House and the clean-energy industry are likely to keep looking to the Defense Department to help drive market demand and research breakthroughs.
No matter who is president, to a large extent, the party that wins control of the Senate in November will determine energy policy in the near term. If Democrats retain their Senate majority and Republicans keep control of the House, either a President Obama or a President Romney would find it difficult to advance more than piecemeal portions of his energy agenda through Congress. If Obama keeps the White House and Republicans control both chambers of Congress, he probably wouldn’t be able to get anything accomplished on Capitol Hill; indeed, an all-red Congress would likely put Obama in the position of defending his current policies. Republicans in Congress have sought repeatedly to wipe out EPA’s clean-air and clean-water rules; to end production tax credits and loan-guarantee programs for clean energy; and to aggressively expand offshore drilling. In that scenario, Obama’s challenge will largely be whether he could extract any deals from Republicans to forestall wholesale rollbacks. In the absence of any help from Congress, Obama would likely continue to use his executive authority to implement environmental regulations through EPA, including controversial new rules to limit smog and carbon pollution from existing coal-fired power plants.
If Republicans win the White House and both chambers of Congress, the sweep would almost certainly signal the end of the 2004-era climate- and clean-energy-friendly Romney. “It wouldn’t matter if Romney still had those same views,” said Michael McKenna, a GOP lobbyist for the energy industry. “He’d be there to sign the bills that the Republican Congress sent him.”
A few pieces of the post-2012 energy landscape are starting to emerge even now. One is the Keystone XL pipeline. When Obama bowed to pressure from environmentalists to reject the pipeline’s proposed path, he gave Republicans a campaign gift that has kept on giving. The pipeline, which could offset U.S. oil imports from the Middle East with oil from Canada while creating thousands of jobs, has broad public support—even within many quarters of the Obama administration. Republicans have turned the pipeline against Obama in campaign ads, and a President Romney would certainly approve its construction. But Obama may well approve it first. Before environmentalists turned the issue into a lightning rod, the State Department was very close to giving final approval for the project. For now, the president has simply delayed the decision pending a fresh permitting and siting review, and there is reason to think that the administration will grant final approval after the election, when Obama is no longer beholden to the environmental groups.
Looking to the next Congress, even if lawmakers agree on no major energy bills, another legislative vehicle may yet alter the energy landscape. Congress is likely to take up a sweeping tax-reform effort in 2013, which is certain to include changes to the energy-tax code. On the campaign trail, Obama has kept up a steady, populist refrain about big oil’s corporate tax breaks. For years, oil companies have managed to protect their $4 billion in annual tax benefits, but those subsidies will definitely be on the table when members of Congress sit down to hash out corporate tax reform, as will all the tax incentives that the renewable-energy industry enjoys.
Depending on which party controls the Senate, a discussion of the ultimate energy tax—a tax on carbon emissions, endorsed by environmentalists as well as Mankiw and many other economists—could make it into the mix. For now, advocates say that a carbon tax is only a long shot. But the tax-reform debate may offer the only real chance of enacting major energy or climate-change legislation under either President Obama or President Romney.
This article appears in the August 25, 2012, edition of National Journal Magazine.