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New Energy Economy: Part 2, Exploring the Tough Questions

By Bill Becker

"New Energy Economy: Part 2, Exploring the Tough Questions"

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Part 1 looked at some of the climate actions Obama should take in his first hundred days. This post looks at some of the tough questions that are posed by the climate and energy dilemmas.

To lead America into a post-carbon economy, President Obama and the 111th Congress will have to revolutionize the biggest and most heavily lobbied of the government’s programs. That means taking on the armies of the status quo, who have money and inertia on their side.

It’s a battle that must be fought and won. Today, our public policy is riddled with crisis-inducing, self-defeating contradictions. The next Congress will have to resolve some tough questions that past Congresses avoided. For example:

1. What action will Congress take to prove to the world that the United States is serious about addressing climate action?

This isn’t only an issue of perception. Unless the U.S. goes to Copenhagen at the end of 2009 with a strong domestic program to cut greenhouse gas emissions, it will have little influence at the international negotiating table.

Half-hearted legislation won’t do. Barack Obama’s election has fueled hopes in the European Union and the developing world that the United States — the nation most responsible for the emissions in the atmosphere today — will lead the global climate effort.

The approach endorsed by Obama and by members of Congress is a “market-based” cap and auction program. Congress would put a cap on U.S. emissions. The federal government would auction “emission allowances” to polluters, who would be allowed to buy and sell the allowances to one another.

But the latest scuttlebutt in Washington is that Congress probably will not pass a cap-and-auction bill next year. The reasons: There is no agreement on the architecture of a program; a carbon cap will increase the price of fossil fuels and politicians won’t vote for that in the middle of a recession; and lawmakers are concerned that if they approve a carbon-trading system before the rest of the world does, the U.S. program won’t fit and will have to be legislated all over again.

But some observers predict that if the United States doesn’t approve cap-and-auction before, there’s little prospect that other nations will agree on one in Copenhagen. Thomas Becker, Denmark’s chief climate negotiator, warns that no action by the U.S. Congress could derail international progress and result in years of more inaction.

So, if not cap-and-auction, then what will Congress do?

2. Can the U.S. have credibility in international negotiations without adopting a much higher carbon-cutting goal?

The European Union and many developing nations say that to avoid the worst consequences of climate change, industrialized economies should reduce their greenhouse gas emissions 25-40 percent below 1990 levels by 2020. That’s far more ambitious than any legislation in Congress or the target Obama proposed during the presidential campaign (1990 levels by 2020).

3. How will Congress reconcile the contradictory goals of subsidizing and producing more dirty fuels while rapidly reducing U.S. carbon emissions?

While estimates vary widely, the federal government sends the oil, coal and natural gas industries about $30 billion in taxpayer money every year to subsidize the production of carbon-intensive fuels. Earlier this year, intimidated by record high gasoline prices, politicians from both parties jumped aboard the “drill, baby, drill” bandwagon and endorsed more domestic oil production. And in the economic rescue package it passed in October, Congress approved billions of dollars in new subsidies for “dirty fuels” — liquid fuels from coal, oil shale and tar sands that are even more harmful to the climate than conventional petroleum.

In the same legislation, Congress extended tax incentives for solar and wind energy development in the United States. It’s likely that the carbon pollution from subsidized dirty fuels will cancel all or part of the carbon savings from subsidized solar and wind energy.

In addition, can a cap-and-auction regime intended to engage the marketplace in emission reductions by correcting price signals do a good job while fossil energy subsidies are distorting the same price signals?

The reality is that fossil energy subsidies cannot coexist with sane and effective climate policy. It’s time to stand up to the fossil energy lobby.

4. When will we stop investing in Futurama?

The biggest near-term opportunity for the White House and Congress to begin shaping a new energy economy will come next year when the surface transportation program comes up for reauthorization. Today, our transportation policies are still funding the vision of the car-centered society that General Motors unveiled at its Futurama pavilion at the 1939 New York World’s Fair.

As a result of current national policy, our cities are designed to move cars rather than people; transportation uses two-thirds of all the oil consumed in the United States and accounts for nearly 30 percent of our greenhouse gas emissions. The largest source of those emissions is passenger vehicles averaging 19.6 miles per gallon.

Federal transportation funding is biased toward roads and cars. Money is allocated in large part based on how many miles of road lanes are located in each city, how much fuel is consumed and how many miles vehicles travel. The federal share of capital investment in new highways is 80 percent, but it’s only 50 percent for public transit projects.

Congress should seize the opportunity next year to shift the emphasis from building roads to building mass transit systems, high speed rail, and transit-oriented communities.

5. How do we close the gap between what scientists say is necessary and what politicians say is possible?

This is the biggest question of all. Congress responded to the economic meltdown with an intervention in the financial world that most of us never thought we’d see. Will Congress intervene as boldly in the carbon economy to prevent the uncontrolled growth of carbon debt?

Perverse, contradictory, entrenched, crisis-producing public policies are the norm in the government that Barack Obama will soon lead. Here, more than anywhere, we need change we can believe in.

Part 3 looks at “The Next Transition Team.”

– Bill B.

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2 Responses to New Energy Economy: Part 2, Exploring the Tough Questions

  1. Manuel says:

    Hello, will you elaborate on Federal funding for oil and coal industry. Please provide information on articles in your blog which talk about U.S. energy policy or provide an outside link

  2. Bill Becker says:

    Manuel – Coal and oil subsidies take many forms, some of them monetary and some in the form of relaxed environmental standards and other policy.

    For example, the United States charges one of the lowest royalty rates in the world for allowing oil and gas companies to drill on public lands. The oil and gas industries both benefit from publicly funded R&D, including the enormous amounts of taxpayer money being invested in research on carbon capture and sequestration. Both industries receive a variety of tax breaks.

    In the nonmonetary category, the Bush Administration has relaxed environmental regulations to allow coal companies to dump their wastes in waterways in Appalachia, where the companies literally remove the tops of mountains to mine coal. And over the last several years, the Bush Administation has relaxed environmental reviews to speed up the issuance of leases for oil and gas exploration on public lands in the West, at the same time it has slowed down approval for solar installations on public lands.

    One good source of information on subsidies is Doug Koplow of Earth Track. http://www.earthtrack.net/earthtrack/index.asp?page_id=151&catid=74.