Obama energy thoughts

Thoughts and reactions on Obama's bold new energy proposal

Posted by David Roberts at 1:40 PM on 08 Oct 2007

Staying with the Monday Is Obama Day theme, here are a few thoughts on Obama's energy plan. (Full plan here; speech introducing the plan here.)

Overall, I'm pleasantly surprised -- even shocked -- at its quality. It's a deft mix of good politics and strong, substantive policy. Here are what I see as the three headlines:

100% auction of cap-and-trade credits. This is a home run, a real act of standard-setting boldness (the kind that Obama always promises but rarely delivers). The green community should immediately use it to push Clinton and Edwards into making the same commitment, insuring that it's the new baseline for any cap-and-trade program.
Smart investment. The revenue from auctions will be considerable, up to $50 billion a year, and Obama's smart about putting it to work, dividing it between energy R&D, protections for low-income workers, and market deployment of existing clean tech.
A focus on efficiency. Clearly Obama gets that efficiency is the easiest route to emission reductions, and he's got a set of thoughtful, detailed initiatives to make it work.

More detailed thoughts below the fold.

Much has been said about Edwards' important role in this campaign: pushing the other candidates toward stronger, more ambitious policy. You can see it at work here -- in several respects Obama's energy proposal echoes Edwards'.

However, with his promise to auction 100% of cap-and-trade credits, Obama has put himself out ahead of all the other frontrunners. He deserves the praise he'll get for it.

As for investing the auction revenue, Obama gets it absolutely right:

Some of the revenue generated by auctioning allowances will be used to support the development and deployment of clean energy, invest in energy efficiency improvements and address transition costs, including helping American workers affected by this economic transition and helping lower-income Americans afford their energy bills by expanding the Low Income Home Energy Assistance Program, expanding weatherization grants for low-income individuals to make their homes more energy efficient, and establishing a dedicated fund to assist low-income Americans afford higher electricity and energy bills

Note that Obama is neatly transcending the faux-controversy between Shellenberger & Nordhaus and their critics: He's putting regulation and investment on equal footing.

He's smart on investment, too -- some of it is for basic R&D, some of it for green jobs programs, and some for pushing existing technologies to market. I particularly like this:

The Clean Technologies Deployment Venture Capital Fund will be modeled on the highly-successful Central Intelligence Agency In-Q-Tel program. In-Q-Tel is a non-profit, independently-managed venture capital fund led by seasoned venture capital professionals to develop new intelligence technologies for the CIA. The first five years of In-Q-Tel funding led to 22 new technologies being used in 40 government programs.

The CTDVCF (which needs a better acronym) would be specifically designed to get technologies across the "valley of death" that separates the lab and the market. This is a creative way to spur rather than replace market incentives.

Naturally I'm not too excited about the ethanol business, but if you must have ethanol, this is about as good a balance as you could as for. It's frank about the limitations of corn ethanol and promises plenty of research money for cellulosic. Most importantly, it specifically calls out the importance of local ownership of biofuel refineries, and promises some incentives that would encourage it.

Here's the wording on dirty coal plants:

Obama will use whatever policy tools are necessary, including standards that ban new traditional coal facilities, to ensure that we move quickly to commercialize and deploy low carbon coal technology. Obama's stringent cap on carbon will also make it uneconomic to site traditional coal facilities and discourage the use of existing inefficient coal facilities.

Sounds like he's proposing more or less what Edwards is: requiring that new coal plants be IGCC. As I said in this post, that's a big risk, and not anything close to as bold as requiring working CCS. Combined with the price on carbon, though, it certainly sends the right signal to coal companies: old-fashioned dirty coal is on the way out. Greens should push Clinton to go at least this far.

On efficiency, some highlights include making all new buildings carbon neutral by 2030, decoupling in the utility sector, and my personal favorite, investing in the smart grid.

The transportation stuff contains the usual promises to boost CAFE standards and mandate flex-fuel vehicles, but -- praise be -- it also contains several measures to reduce driving. Listen to this sweetness:

Barack Obama believes that we must move beyond our simple fixation of investing so many of our transportation dollars in serving drivers and that we must make more investments that make it easier for us to walk, bicycle and access other transportation alternatives.

There's a limited amount the federal gov't can do on this score, but Obama has been thoughtful about how to use those tools.

Finally, Obama says all the right things about the international effort -- re-engage with the UN process, bring developing countries in, etc. etc.

There are certain areas where the plan is vague, and a few others where I'd disagree on details, but overall I think greens should be happy with its comprehensiveness and boldness. It's just stunning how far the energy policy discussion has come in the last couple of years.

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21 Comments | Post a Comment

So Romm and S&N could agree...

...on Obama's plan, I said they could agree on something like this, here and here, so no more arguments from those three, should I be an environmental conflict resolver, or what?

by Jon Rynn at 1:50 PM on 08 Oct 2007

I agree, mostly.

Generally this looks very positive, although I would have liked to see a bit more on regulatory reform. It is primarily a financial bill, redistributing wealth from one sector to another, with some of the big beneficiaries being R&D (smart grid, etc.) This is fine as far as it goes, but I sure would like to see someone acknowledge how much can be done simply with regulatory reform. Not because we don't need both, but because regulatory reform doesn't need fiscal authorization. And as anyone who's been in DC long enough goes, there is a big difference between authorization and appropriation. (It's why House Ways & Means is such a powerful committee.) Decoupling is certainly a good step in that direction though. And as you say, it is remarkable how far we've come in the last 18 months.

by Sean Casten at 1:50 PM on 08 Oct 2007

Cap & Auction

If it 100% of permits are auctioned, then there is no almost no trade. Because permits are generally bought as needed. So secondary markets are small to non-existent. Please don't confuse cap n' trade with cap n' auction. The difference is critical.

by Gar Lipow at 4:11 PM on 08 Oct 2007

he sure is convincing, but....

I'd like to hear some more elaboration on "clean-coal." Last time I checked, Obama was all about liquified coal to fuels. Does he still sing those praises, or is he taking a more climate conscious stance to that?

by sasquatch at 7:47 PM on 08 Oct 2007

What's Worse?

H. Clinton who uses the backs of children to gain power?

Or Obama, who is in fealty to the corn (syrup) industry.

Either way, don't vote Democrat.

by jabailo at 8:15 PM on 08 Oct 2007

black is not the new green, either

BO.com: "Coal is our nation's most abundant energy source"

Umm . . . isn't solar and wind the most abundant energy source? BO is an ignorant pimp for coal, make no mistake about it.

It's stunning how far global warming has come in the last few years (as runners drop like flies in Chicago from the heat). Greens should be as happy with this BO plan as someone dying of thirst is happy getting spit in the face.

by ids at 9:10 PM on 08 Oct 2007

How is Obama Different than S&N?

I've read S&N's book, and it looks like Obama (or at least Obama's energy people) have as well. My reading of S&N is that investment must be on an equal substantive footing as reducing carbon, but from a message and framing standpoint, investment is a much better lead than simply limiting carbon. I've never seen them say that we should not limit carbon emissions. In fact, I've seen them say both in their book and in their online postings, that we must limit emissions, but that the frame is wrong. And that it's wrong to dismiss investment out of hand. And Obama, by adding a substantive investment piece, seems to agree.

From a message point of view, if Obama becomes the Democratic nominee, I'm confident he'll talk more about investing in clean energy and creating new jobs than he will about limiting carbon emissions. Why? Because it's a much better message than limiting emissions. And it will build the kind of political capital necessary to pass substantive cap and trade.

But David clearly has something personal against S&N. First comparing them to Bjorn the denier, and then, when a major Presidential candidate proposes damn near precisely what they've been proposing (linking emissions reductions and investment), you use it as an opportunity to set them up as straw men once again.

What gives?

by jackburden at 5:25 AM on 09 Oct 2007

there's a "Cap" in Cap & Auction

Responding to GL above: "If it 100% of permits are auctioned, then there is no almost no trade. Because permits are generally bought as needed. So secondary markets are small to non-existent. Please don't confuse cap n' trade with cap n' auction. The difference is critical."

The whole point of Cap+Trade or Cap+Auction is the cap. Ignoring for a minute the debate between carbon taxation and C+T or C+A (this is where the real debate should be, as the Stern Report elegantly argues) the cap in either system is arbitrary and the major lever of the entire policy. Permits cannot simply be "bought as needed" unless the cap is unreasonably high. Most of the proposals out there, including Obama's, talk about capping at some moderately reduced level in the short-term (up to 2020) and reducing it drastically in the long-term (mostly defined as 2050), as investment and R+D make it more economically feasible to move away from current energy and production practices. Thus, with limited amounts of emissions allocations available, buyers are forced into secondary markets. This is the entire point of either C+T or C+A--the difference between them lies in initial allocation of emissions, again as argued by Stern.

by clweber at 6:19 AM on 09 Oct 2007

Please, don't allocate

Gar,

The trade is implicit in the cap structure. The auction simply refers to whether the starting value of the cap is set by auction or allocation. Once established, all the models include a way to trade, essentially modeled on what we've already done with the tradeable sulfur market. And an auction is VASTLY preferable to an allocation. Again, the sulfur experience is instructive. In that case, we allocated, with the historic emitters being given a free pass. The result was that new, low (but non-zero) sulfur plants faced an economic hurdle to build their plants, even while the old, dirty plants faced no economic hurdle to continue operation. The price of sulfur did eventually come down through trading, but it took much longer than it need to have because most of the market had no incentive to participate.

Additionally, an allocation system creates a huge incentive to over-allocate, as the folks with the allocated gift - who represent the established, status quo - have big lobbying arms that push hard to maximize the size of their gift. This means that the cap is too high, and those big polluters end up not only not having to pay, but also having extra permits that they don't need, which they can sell to the market. In other words, the biggest carbon sources not only have no incentive to control their carbon, but find themselves making a lot of money trading carbon credits they got for free... all in the name of carbon control, of course. (This has happened in Kyoto, where one of the biggest economic beneficiaries of the agreement has been the coal-fired power industry. If you need a test of whether your carbon policy worked, NOT incentivizing coal-fired power seems like a good test... and yet this is exactly where an allocation framework leads.)

Bottom line is that while the universe of carbon legislation certainly has more options than are currently in the public debate, once we decide on a cap & trade framework, we ought to push very hard for an auction rather than allocation methodology. The latter simply defers the time until we get serious about carbon reduction. Time which Hansen seems to think we don't have.

by Sean Casten at 7:05 AM on 09 Oct 2007

do cap programs include auto emissions?

Anybody? does cap and trade or cap and auction only involve industrial and utility generation, or does it also include commercial and governmental buildings? but only cafe can deal with auto emissions under this scheme, right?

by Jon Rynn at 7:06 AM on 09 Oct 2007

Jon

Most of the plans that I am aware of are not economy-wide. Just about all of them include power, up to some limit (e.g., RGGI only caps emissions from power plants >25 MW). Some of them also include thermal energy sources from selected industrials. (e.g., CA). Most ignore vehicles and small residential/commercial sources on the basis that these are simply too difficult to regulate through this metric, and therefore target through some combination of CAFE, building codes, fuel taxes, etc.

For what it's worth, my personal feeling is that this is the right approach, as it's really hard to see how you would monitor carbon emissions from every tailpipe and figure out whether some individual had a credibly defensible amount of carbon to buy/sell. (As a friend recently put it, there are four thing that matter for automotive carbon emissions: what fuel you use, what car you drive, how you drive and how much you drive. Of those four, the last two are really hard to regulate - but if you only regulate the first two, you miss half of the problem.)

by Sean Casten at 7:32 AM on 09 Oct 2007

Jon - one more thing

Keep in mind that controlling carbon emissions is fundamentally about heat and power. 39% of US GHG emissions come from power generation and 28% come from heat (18% of which is the big stuff in the industrial sector). So if you "only" cover those two sectors, you've got >2/3rds of the GHG emissions capped. Transportation is significant at 32%, but only 19% of that is passenger vehicles. So while automotive CO2 emissions are individually significant (e.g., one of the most significant places where individuals can affect their carbon footprint), it is far from the most important regulatory pressure point from a total GHG perspective. Worth keeping in mind when we think about tradeoffs between CAFE and other sectors in DC.

by Sean Casten at 7:38 AM on 09 Oct 2007
[ Parent ]

Thanks, Sean...

I figured that cap programs could only deal with larger sources. I realize that power generation and heat (and cooling) account for the biggest chunk of GHG emissions, but I keep coming back to renewable electricity standards, which sounds more straightforward to me than cap programs (and also regulatory changes that you advocate). Also, I think you're right about autos -- particularly the "how much you drive" business, which is why I keep chanting here with the mantra "public transit".

The other reason to worry about cars, of course, is peak oil -- according to my calculations, something like 90% of oil use is for internal combustion engines (I should do a post on that). So there are two main reasons to be aggressive about autos, but the cap or res initiatives can go forward without necessarily solving the transportation one, I suppose, as important as that one is.

by Jon Rynn at 7:55 AM on 09 Oct 2007

Obama's business plan

Focus on efficiency? There's nothing inherently "good" about being efficient. Why are we cutting corners when we could be eliminating problems at the core? I'm not talking about sweeping, extreme changes, I'm talking about things that we would have started doing years ago if business hadn't stuffed a wad of cash in the mouth of government: developing a nationwide railroad, cutting reliance on coal, signing Kyoto, ending oil subsidies, planting something other than corn, etc.

Coal and corn are this man's interests. Obama is only implementing strategies that will allow these industries to continue taking from the future for the sake of a luxurious present. It will be old fashioned industrial practices with a new coat of paint.

How does Obama define green tech? He defines it as coal with a filter. But let's face it: in 19 states it's unsafe to eat fish because of mercury contamination due to coal. Asthma, multiple-chemical sensitivity, and cancer are epidemic - ask any health care professional living in the coal belt. And we call this green? (Don't even get me started on the VAST expanse of subsidized, barely-profitable, overproduced monoculture that is industrial corn farming in the midwest! Apparently this passes for green tech, too!)

There's no such thing as clean coal.

EVERYONE! SAY IT WITH ME, NOW!
There's no such thing as clean coal!
There's no such thing as clean coal!
There's no such thing as clean coal!

How about this one, for Obama:

Ring around the rosie
A pocketful of coal, see?
Ashes, Ashes
We all fall down!

There's nothing "ambitious" about these policies, and there's nothing green about Barack Obama.

by zacaroni at 8:06 AM on 09 Oct 2007

Jon

You've probably heard my rant before, but renewable electricity standards are, in many ways an inefficient way to do carbon because they all start with a path rather than a goal. Carbon capping policies - if done right - will provide economic incentives for all the technologies rewarded with RES programs, plus a lot of other technologies that aren't among the favored few. This is important because (a) we have lots of technologies that are available to reduce carbon; (b) the total suite of technologies available is vastly larger than the narrow list included in existing portfolio standards, and; (c) the scale of our challenge requires that we use all of them.

Indeed, we're already seeing the limits of the RES approach (witness the USA Today article last week about how the prices for RPS credits are going up because they are almost all supply constrained. This isn't because we don't have lots of options for clean energy, but rather because the existing regs have only granted eligibility to a narrow list of clean energy techs.) Which is fine if our intent is to create new industries, favor specific techs, etc., but is a sloppy way to do carbon. Controlling carbon will take conventional solar-wind-hydro renewables, but will also need the full participation of biomass, efficiency, nuclear, conservation and lots of other techs we haven't yet thought of. RES policy, being based on paths rather than goals is by design unable to be all-inclusive.

by Sean Casten at 8:45 AM on 09 Oct 2007
[ Parent ]

Well, what about....

...just telling utilities that by a certain year, they have to be down to a certain amount of carbon, do it however you have to -- but no buying or selling, just the cap?

by Jon Rynn at 9:05 AM on 09 Oct 2007

That's better, but

Why limit to utilities? What matters is that we drive down carbon emissions, not that we only drive down those carbon emissions that are associated with the operations of investor owned utilities. And let's not lose sight of the fact that those utilities have done an abysmal job of controlling carbon to date, now running at half the efficiency they ran at in 1910. To my way of thinking, putting the burden for controlling carbon on electric utilities is like putting the burden for the NBA title on a bunch of midgets. Sure they could work really hard at it and we could all be ennobled by their occasional successes, but why constrain ourselves?

Far better simply to provide an incentive for controlling carbon to everyone. If utilities want to participate, that's fine. If they'd prefer to follow their past century of behavior, that's fine too, but let's make sure that they feel a lot of financial pain for doing so. But for goodness sake, let's put the varsity on the field.

by Sean Casten at 9:13 AM on 09 Oct 2007
[ Parent ]

Utilities as an example...

...personally, I'd rather see the Feds control/own the grid, municipal utilities own/construct much of the generation. I mean, if we did use public funds to actually build solar/wind/geothermal, the public should own it. But you could put a hard cap in place with lots of fines if they don't meet it, and the same with industrial facilities, big commercial,etc. And not put blocks in the way of hooking up to the grid, as you've argued.

by Jon Rynn at 9:28 AM on 09 Oct 2007
[ Parent ]

Nice synopsis....

this is exactly why I have been supporting Obama from the start and working on his campaign. Let's make it happen people!!! It's time for a change, a real change....

http://www.barackobama.com/

J.S.

Economic Illiteracy Harms The Planet! www.voicesofreason.info.

by Jason D Scorse at 9:18 PM on 09 Oct 2007

Capping the transportation sector

Jon and Sean,

Actually, almost all proposals due in fact include the transportation sector (at least all federal proposals plus CA's AB 32) by including oil refineries (and sometimes importers) "upstream" in the cap. That is an oil refinery or oil/refined product importer would need to submit emissions allowances for each ton of carbon in the fuel that they sell, in addition to the emissions that actually come out of refinery smokestacks. The cost of those emissions is therefore passed "downstream" to consumers in the price of fuel, essentially implementing a carbon content-based fuel tax that should hopefully reduce demand by encouraging conservation and fuel efficiency.

That's the idea anyway, and is how you wrap the transportation industry (both freight and light vehicles) up in the cap.

Check out World Resource Institutes's excellent side-by-side comparison and analysis of the current federal climate proposals here.

Jesse Jenkins _____________________ WattHead - Energy News and Commentary http://watthead.blogspot.com

by Watthead at 9:24 PM on 09 Oct 2007

Watthead

Good correction - thanks. RGGI does not do that of course, but CA does. My understanding is that some of the federal proposals do and some don't, but I often hear it coupled to CAFE.

My personal belief is that you probably have to have some kind of technology mandate on the transportation side, simply because the relatively low annual capacity factor on a vehicle means that energy costs are a small fraction of total ownership costs, and therefore taxes on fuel aren't going to do much to shift demand - as the run up in gasoline prices over the last 5 years shows all too well.

But that's personal theorizing - not necessarily what the policies say.

Anyway, thanks for the correction.

by Sean Casten at 6:15 AM on 10 Oct 2007
[ Parent ]

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