by Daniel J. Weiss
President Barack Obama described a “Blueprint for an America Built to Last” in his State of the Union address last night. It is designed to keep alive the promise of “an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules.”
The plan includes a clean energy agenda that would help achieve this promise with well-paying jobs, lower energy bills, and cleaner air and water. Hopefully Republican congressional leaders will help him build it.
These energy proposals are reinforced by the Energy Information Administration’s just-released Annual Energy Outlook 2012 Overview, which includes the latest energy data and future projections. These predictions reveal that we must invest more in energy efficiency and clean renewable electricity while we produce more domestic oil and gas.
Below are the highlights of President Obama’s proposal and the new Energy Information Administration information that reinforces their importance. They include:
- Energy efficiency—using less and saving more
- Oil and natural gas—boosting production, jobs, and security
- Tax fairness—ending Big Oil tax breaks
- Renewable energy—creating clean jobs
- Public health—protecting our children from toxic air pollution
- Global warming pollution—making slow progress but more pollution reductions essential
Energy efficiency: Using less and saving more
President Obama noted that more efficiency yields “less pollution, more manufacturing, and more jobs for construction workers who need them.”
The president proposes to create incentives and eliminate regulatory barriers to use energy more efficiently in manufacturing facilities and businesses. This proposal would create badly needed manufacturing and construction jobs, as well as save companies $10 billion annually due to lower energy bills. These savings should enable these companies to invest more in job creation and/or keep their prices low.
These new incentives—to be announced later this week—are essential because Energy Information Administration analysis predicts that, in the absence of greater efficiency measures, “primary energy intensity” (one thousand British Thermal Units of energy per dollar of gross domestic product) will remain essentially unchanged in 2025 compared to 2011 predictions. EIA also projects a slightly higher price of electricity in 2025 than last year’s estimate due to the “upward trend of coal prices.” Higher prices would increase the economic benefits of using less power.
The president’s administration has already taken essential steps on automobile fuel efficiency. It forged agreements between car companies, United Auto Workers, states, and environmentalists to modernize light-duty fuel economy standards for the first time in two decades. After the 2017–2025 standards are finalized later this year, vehicles in 2025 will be twice as fuel efficient as they were in 2009. This leap in efficiency will save more than 2 million barrels of oil per day and reduce the average driver’s gasoline bill by a net of $4,000 over the life of these more efficient vehicles—a real economic benefit to middle-class drivers plagued by high gasoline prices.
Oil and natural gas: Boosting production, jobs, and security
This administration has presided over a large increase in both oil and natural gas production that creates jobs and, in the case of natural gas, can lower electricity prices for middle-class Americans. EIA just found that:
U.S. crude oil production increased from 5.1 million barrels per day in 2007 to 5.5 million barrels per day in 2010. Over the next 10 years, continued development of tight oil, in combination with the ongoing development of offshore resources in the Gulf of Mexico, pushes domestic crude oil production in the Reference case to 6.7 million barrels per day in 2020, a level not seen since 1994.
Growing demand for oil from China, India, and other countries, combined with instability in the Persian Gulf, will keep oil prices high. The president acknowledged that even the increase in domestic production cannot address this problem: “With only 2 percent of the world’s oil reserves, [more] oil isn’t enough.”
Natural gas production, too, has increased over the last few years. EIA predicts that “U.S. production of natural gas is expected to exceed consumption early in the next decade.” This could create 600,000 jobs by 2020. EIA estimates that with the “recent rapid decline of natural gas prices, [future] real average delivery prices… [will] fall” below previous estimates. Lower gas prices will help middle-class families make ends meet.
Additionally, this boom in domestic energy production has created an additional 75,000 jobs in oil and gas production over the last three years, based on Bureau of Labor Statistics data compiled by the Center for American Progress.
The president, however, noted that the expansion of natural gas production must occur responsibly. He promised that his administration:
Will take every possible action to safely develop this energy…I’m requiring all companies that drill for gas on public lands to disclose the chemicals they use. America will develop this resource without putting the health and safety of our citizens at risk.
Disclosure of the cancer-causing and other harmful chemicals used in fracking fluids injected deep below the Earth’s surface to shatter shale rock and free natural gas underneath public lands will help protect adjacent communities from air and water pollution, particularly in Colorado, Wyoming, and other Western states.
Tax fairness: Ending Big Oil tax breaks
All this production and the highest average annual real oil price since 1864 have been very good for Big Oil. The five biggest oil companies—BP, Chevron, ConocoPhillips, ExxonMobil, and Shell—are likely to have made $130 billion in profits in 2011. Yet these companies get approximately half of the $4 billion in annual tax breaks for Big Oil.
President Obama noted, “We have subsidized oil companies for a century. That’s long enough. It’s time to end the taxpayer giveaways to an industry that’s rarely been more profitable.”
What’s more, like Warren Buffet and his secretary who pays a higher tax rate than he does, some oil companies pay a lower effective federal tax rate than the average American family. ExxonMobil, for instance, had a federal tax rate of 18 percent in 2010, while the typical family’s rate was 20 percent. Exxon and the other four companies can easily afford to forgo these tax breaks because they had cash reserves of $59 billion in 2011.
Congress must finally eliminate these tax breaks to the wealthiest public corporations in the world.
Renewable energy: Creating clean jobs
Our economic competitors, particularly China and Germany, are heavily investing in the clean energy technologies and jobs of the future. This includes wind and solar power for electricity and advanced batteries for hybrids and electric vehicles.
Under this administration the use of renewable electricity has nearly doubled. And in 2011 the United States invested more money in clean energy than China.
To maintain this momentum the president called for the development of 10 gigawatts of renewable electricity on public lands. This goal is within reach. At the end of 2011, the Department of the Interior had approved:
25 major renewable energy projects on public lands. When constructed, the projects are expected to create nearly 12,000 construction and operational jobs and produce nearly 6,200 megawatts of energy, enough to power 2.2 million American homes.
This effort is very timely because there is some indication that the historical low price for natural gas is competing with renewable energy sources such as wind and solar power, which are much cleaner to produce and operate. In fact the Energy Information Administration’s 2012 projection for nonhydro renewable electricity in 2025 is lower than last year’s estimate. Generating more clean electricity from public lands would provide more uncontaminated renewable power and create more jobs.
Another tool to increase the generation of clean electricity and create jobs is the president’s proposal to “pass clean energy tax credits.” Congress should extend the production tax credit for wind energy, which expires at the end of 2012. It effectively reduces the cost of wind power by 2.2 cents per kilowatt-hour. Without an extension 37,000 well-paying jobs are at risk because investments in wind projects will decline.
In the 2011 State of the Union address, President Obama called on Congress to pass a clean energy standard that would increase electricity generation from clean sources such as wind, solar, geothermal, and biomass. Increasing demand for clean energy technologies with a clean energy standard will also increase domestic manufacturing of clean energy equipment and components.
Unfortunately Congress has not acted on this proposal. In the absence of legislative action, the president will provide a boost to renewable energy manufacturing and construction by military investments in renewable energy. He announced last night that “The Department of the Navy will make the largest renewable energy purchase in history—one gigawatt.” This is enough electricity to power 300,000 homes.
Public health: Protecting our children from toxic air pollution
President Obama noted that his administration had simplified many regulations. At the same time, he opposed efforts by congressional Republican leaders to undo public health safeguards:
I will not back down from making sure an oil company can contain the kind of oil spill we saw in the Gulf two years ago. I will not back down from protecting our kids from mercury pollution, or making sure that our food is safe and our water is clean.
The president is right. Children, seniors, and other vulnerable populations are most susceptible to harm from air pollution. The administration’s new requirements to reduce smog, acid rain, mercury, and air toxics from power plants will save 45,000 lives annually, enough people to fill a major league baseball park.
Global warming pollution: Making slow progress but more pollution reductions essential
President Obama acknowledged last night that too many legislators oppose a comprehensive program to reduce the carbon dioxide pollution responsible for global warming, saying, “The differences in this chamber may be too deep right now to pass a comprehensive plan to fight climate change.”
This opposition is unfortunate because the United States is lagging behind its commitment to reduce this climate pollution by 17 percent below 2005 levels by 2020. This reduction level is a down payment on the 80 percent reduction in pollution necessary by developed countries by 2050 to help stave off the worst impacts of climate change.
The Energy Information Administration projects that carbon dioxide pollution will be “more than 7 percent below its 2005 level…in 2020.” This is an improvement compared to the 2011 projection, but it’s still less than half of the reductions necessary to meet the 2020 goal.
There are two positive notes to add here, though. First, this new estimate does not include the administration’s proposed improved fuel economy and carbon dioxide standards for light vehicles built from 2017–2025. These standards would cut “six billion metric tons of carbon dioxide pollution…over the life of the program.” These new standards should be finalized at the end of March.
Second, the Environmental Protection Agency plans to issue final standards to reduce carbon dioxide pollution from power plants by May 26 as part of a settlement agreement with environmental organizations. These would be the first carbon dioxide pollution reductions for its largest stationary source. These new standards should further decrease future global warming pollution levels.
The aforementioned investment in energy efficiency and renewable technologies will also reduce electricity generation from coal- and natural-gas-fired power plants that produce millions of tons of carbon dioxide pollution.
The State of the Union address featured a “blueprint for an economy that’s built to last–an economy built on American manufacturing, American energy, skills for American workers, and a renewal of American values.”
The president’s clean energy agenda will contribute to the achievement of these goals.
- Investments in renewable technologies will boost domestic manufacturing and increase homegrown energy.
- Investments in training workers for the manufacturing, construction, and operation of clean technologies are vital to our long-term economic competitiveness.
- Helping Americans earn more while spending less on energy will strengthen the middle class.
- Pursuing these goals can help the economy work for everyone, not just the privileged few.
This agenda tested very well with voters watching the speech live. Democratic pollster Stan Greenberg found that the energy “section received the highest sustained ratings of the speech from Democrats and independents.”
It’s up to congressional leaders to decide whether to help build the strong middle class outlined in the blueprint or to continue support for Big Oil and coal companies and other privileged interests.
Daniel J. Weiss is a Senior Fellow and the Director of Climate Strategy at American Progress, where he leads the Center’s clean energy and climate advocacy campaign. This piece was originally published at the Center for American Progress website.
Thanks to Kate Gordon, Vice President for Energy Policy at the Center.