DR: McCain policy adviser Douglas Holtz-Eakin said that McCain is unlikely to put in place mandatory caps on carbon in the U.S. before China and India do. Will Obama?

JG: First of all, that's a dramatic policy shift from what I understood John McCain's voice on this issue to be for the last decade, which is rather discouraging.

To be unequivocally clear, Sen. Obama believes that the United States must and will act to put a mandatory limit on our domestic greenhouse-gas emissions. That is a predicate for us leading the world to enact a truly equitable and global program in which China and India and Brazil and all the major emitting countries also put legal limits on their emissions. The story of this country has not been waiting to be led by others to address global challenges.

DR: What would he say to the common objection that caps here, without caps there, would disadvantage our economy and send jobs and manufacturing overseas?

JG: Sen. Obama recognizes that it is a profoundly unacceptable outcome if our program simply results in exporting jobs and importing carbon. It is our view that a well-designed program that provides a reasonable trajectory for technology to advance while we achieve the reductions necessary, and provides real incentives so we are reinventing and modernizing our economy along the way, is going to be economically sustainable and ultimately productive here at home. We recognize that the only way to solve this problem is for the U.S. to have both the technological know-how and the international credibility to work with other countries to reach the same conclusion, so that they can reduce their carbon emissions in ways that don't undermine their efforts to progress economically.

Up until now, the developed world has been trying to lead largely absent the U.S. Our commitment is to rejoin the league of nations and work together, recognizing that China, India, and others may be a step behind us, but the global economy and global environment cannot tolerate them being more than one step behind us. So we've tried to put forward carrots and sticks, to encourage those nations to see the benefit of advancing their own decarbonization through technology-sharing and other incentives.

There's a tremendous amount of misunderstanding about the efforts already underway overseas and the opportunities for China in particular to achieve many of its broad international goals in ways that are consistent with emission reductions. The bad news is that they have a very energy-intensive and polluted economy. The good news is that there is a whole lot of relatively low-hanging fruit -- measures that will address their very pressing need to improve public health and urban environmental quality, consistent with the measures they need to undertake to reduce their greenhouse-gas emissions.

DR: The carrot is technology-sharing. What's the stick? A carbon tariff?

JG: Ultimately the solution to global climate change is going to be mediated through the lens of global trade. Sen. Obama has been supportive of mechanisms that have the U.S. take a first step, and if after a period of years other nations are not acting in what is deemed to be a commensurate responsible manner, look to our trade laws to try to ensure that there's no inequity or competitive disadvantage imposed on U.S. businesses. The idea that was initiated by the International Brotherhood of Electrical Workers, in which importers of energy-intensive products would be required to purchase permits for the carbon embedded in those products -- the details need to be fleshed out, but that seems to be a reasonable approach to level the playing field, if we get there.

But Sen. Obama also has faith in the intellect of others. While he believes the United States has a vital role to play in leading this discussion, he does not believe we are going to have to bludgeon other countries into appreciating their own self-interest. Climate change is a real problem. The Chinese are going to suffer the impacts of it much more harshly and immediately than we will. The Chinese and the Brazilians and the Mexican government and others read the same scientific reports as we do. They recognize that the exacerbating cycles of flood and drought will be devastating for countries trying to support billions of people on smaller amounts of arable land, who don't have the same kind of water-handling and -treatment systems. It is the wealthy nations who are in many ways the most hedged and capable of adapting early on.

The U.S.'s inaction has been a real obstacle to the rest of the world. Imagine yourself trying to convince 1.4 billion Chinese people that it's time to step up while the United States refuses to do so. We have an optimism that once we put a forceful foot forward, that in and of itself will dramatically change the debate in a way that's less combative and more collaborative.

DR: There's been a lot of focus on making cars go farther on a gallon of fuel, and little focus on trying to reduce driving miles through public transit and urban design. Urban issues are a huge piece of the climate puzzle, but get almost no attention in these national campaigns. Has Sen. Obama given thought to these issues?

JG: Well, let's just say that's the first time anyone's suggested that Sen. Obama is not in tune with urban America.

We'll start broad and narrow in. To what extent can this problem be solved with Sharper Image techno fixes, and to what extent does there also need to be a response that affects people's behavior? It is inescapable that it's going to require a combination of both things. No one in my political life has found the voice to summon that kind of self-awareness, in terms of our personal consumption, in a political context -- people jokingly deride Jimmy Carter for trying to do it during the 1970s energy crisis. There is a widely held view that the federal government is poorly positioned to bring about that kind of behavioral change.

I personally think Americans are ready and yearning to be called upon to be part of broader collective solutions. The current administration has not given people credit for our ability to see a shared goal and strive for it together. That only happens if you have a president who can, in a compelling way, communicate what the purpose of that effort is. So at the 300,000-foot level, I do believe Sen. Obama has the interest and the ability to motivate the country to appreciate that solving the problem is going to require more than just fancy new gadgets.

Taking a step closer to the ground, the senator's very clear that the federal government sets a broad economic background through a basic price signal, but that there is going to be a critical role for states and local communities to address things like transport and zoning, which have always been much more appropriately the role of local government.

As we think about how the federal government can motivate that, a couple of issues have been part of our conversation. One is that Sen. Obama believes transportation policy, energy policy, and ag policy are all critical parts of this discussion. We've talked about the stovepipes in government. A transportation act will be authorized early in the next administration, and we believe that presents a critical opportunity to address the environmental and energy-security challenges that are essential to transportation policy but have always been seen as afterthoughts.

DR: It's a roads bill, right?

JG: That's what has to change. Transportation policy in this country is still working from the 1950s imperative: economic competitiveness and national security through building an interstate highway system. We need to rearticulate a more clear role for transportation policy, which has to attend to energy security, environmental quality, and global competitiveness, which means thinking differently about how to get the most effective response to the national investment. Addressing climate change is going to require significant investment in infrastructure in the transportation bill -- not just roads, but transportation infrastructure. Figuring out where and how we accelerate the infrastructure for plug-in hybrids, the role of the federal government in trying to promote and enable infrastructure for alternative transportation fuels.

DR: What about a rail network, getting people out of their cars?

JG: There is an idea of mode neutrality -- when we think about functionality, we don't just think about moving people, but we think about the energy and the environmental implications of the different choices. Set up a system that prioritizes federal resources in a manner that attends to all of those goals at the same time and does not foist them against each other.

We hear over and over again from local government that they are most capable when it comes to transportation planning, zoning issues, land-use issues, energy-efficiency standards -- and that the federal program has to not just allow those efforts to continue, but provide incentives, so that efforts to reduce pollution in one town achieve a real ecological benefit and don't just squeeze one side of the balloon.

DR: Is it fair to say Sen. Obama's views on coal have shifted over the course of the campaign? On a panel organized by the Society of Environmental Journalists, you said his assumption is that a cap-and-trade policy like the one he's proposing will effectively serve as a moratorium on coal plants that don't sequester their carbon, and that if he's unable to get that policy in place, he's willing to take other measures that would serve as a moratorium on those plants. Given that most experts think carbon sequestration at scale is ten years out, doesn't that amount to saying, "No new coal on Obama's watch"?

JG: In some ways there has been a sharpening of Sen. Obama's views on the issue, as it relates to the interaction between traditional energy-security questions and climate change. Early on in the discussion, Sen. Obama had taken it as almost so obvious that it need not be spoken -- yet obviously needs to be spoken -- that it is not responsible public policy to address climate change in a way that does not take into account our concerns over energy security, or the energy-security problem in a manner that does not take into account concerns over climate change.

It became clear that the focus on this was so appropriately significant that we needed to really, in every possible way, be articulating policies that spoke directly to energy security and climate change at the same time. That's why we found the low-carbon fuel standard so attractive.

The senator believes it is important that we speak in terms of the ultimate goal, which is reducing carbon emissions in the most cost-effective way possible. It has always been our view that a market-based program that puts a cap on the entire economy and leaves the question of how exactly it is executed to consumers is a more robust approach than trying to come up with a kind of command-and-control smokestack standard for coal plants and gas plants and bakeries and manufacturing facilities and the rest. Absent an economy-wide program, if we start to slice and dice this problem up into hundreds of small regulatory components, we fear that the battle's lost before it really gets engaged.

The senator understands that we cannot solve our climate challenge if we build a new wave of old-technology coal plants, because we'd be locking ourselves into an unacceptable carbon footprint, leaving us the choice of having some technological breakthrough that allows us to retrofit facilities that were not designed for carbon capture and sequestration -- which seems, not impossible, but hard to reach -- or simply stranding these multi-million or -billion-dollar facilities, just shut them off, which certainly is not an economically intelligent approach.

But because that is such a foolhardy business strategy, we remain confident -- and every economic analysis I've ever seen suggests this is well-founded confidence -- that under a carbon-reduction regime like that which we propose, which would obligate an 80 percent reduction over the next three and a half decades, it is profoundly uneconomical to build a new facility that is going to pay a very significant fee to operate. Most of the analysis I've seen suggests that, with a carbon price starting in the $15 [per ton] range and ramping up over time, it becomes uneconomic to build and operate a new coal facility. People differ, but there seems little debate that the program the senator's proposing will have a carbon price that starts north of $15 a ton.

Even in the absence of climate change legislation -- just the anticipation of legislation -- you're seeing what has turned out to be ... I wouldn't call it a functional moratorium on coal, but you're not seeing new facilities moving forward at the moment. Just about everybody now anticipates that we're going to be seeing a mandatory constraint on carbon emissions in this country, hopefully in the next three months, but certainly in the next 18.

That's the basis for believing that the policies we have already articulated make it economically unrealistic -- there's not a Wall Street bank in America who's going to lay down a half a billion dollars in credit to build an uneconomic facility.

DR: If coal companies want to compete in a carbon-constrained market, why shouldn't they fund their own R&D and deployment of carbon capture and sequestration? You don't see commensurate subsidies for other struggling ...

JG: Ah, but my friend, you do. If the Obama campaign was saying we're only going to focus on coal, that would be an entirely reasonable question. But that's not the case. When we look at the future, we see a handful of technologies that have the potential to deliver the vast quantities of non-carbon energy that are going to be necessary domestically and internationally, and they are: renewables -- wind, solar, geothermal, tidal, hydro, and the rest; the opportunity to capture and sequester the carbon from hydrocarbons; the possibility of a new and advanced approach to nuclear power that would not have the attendant waste and safety and proliferation issues; the possibility of a bio-based energy effort, not just cellulosic ethanol but the algaes and the rest; and then somewhat more diverse but myriad breakthroughs in energy-efficiency technology -- advances in semiconducting, small breakthroughs in motors and lighting and heating and the rest.

It's our view that all of these don't have to succeed in order to put us on a path to achieving the kinds of emission reductions that are going to be necessary. But some of them do.

DR: Let me try to pin you down a little bit. Will all of those alternatives receive roughly commensurate support from an Obama administration?

JG: It's a fair question that I can't answer. Commensurate in spirit, yes. They obviously face different challenges, and they're not all just fiscal challenges. The challenges to coal and nuclear are more commonly understood, because those technologies have existed at scale for decades. But the challenges of getting 30 or 40 or 50 percent of our electric power from renewable resources are also immense. They will require tens and hundreds of billions of dollars of investments in energy distribution. They will require real breakthroughs in battery technology to deal with the intermittency issue. There are going to be human-resource and natural-resource issues we come up against. There is an imagination that distributed energy is somehow easy and friendly, but we've seen, as we try to site what many of us thought would be embraced as small, benign windmills and solar facilities, rather strident opposition from many local communities.

We don't have the luxury to not struggle to overcome the problems associated with any of these. We put coal high on that list. Coal may actually be higher on that list in one regard, and that is the perception that absent a solution to the carbon side of the coal equation, there's a real fear that no matter what we do in this country, other countries will develop their coal resources.

DR: I hear that a lot. But the Chinese people are rational actors. If you say to them, we can either make coal clean for X dollars, or we can give you solar thermal technology for X minus one dollars, do they have an inherent affinity for coal?

JG: There's just about universal agreement that X minus one wins the day. But there is an understandable tendency to look first to improving the modes of power generation that have proven capable, trying to render those acceptable and sustainable, rather than the brand new idea. It doesn't mean we're not also counting desperately on the brand new idea -- both of those happen at once -- but we all, for better or worse, live with our histories.

Sen. Obama has been quite aggressive in arguing that the American people should be uncomfortable with our current approach to energy subsidies, in part because nobody can hop onto the internet and understand where the money's been going and what we've been getting for it. The Energy Information Administration wrote a study a couple of years ago that concluded that we spent $13 billion to subsidize domestic oil production, but we can't identify any additional domestic oil that was produced. That disturbs him greatly. He has spoken about the need for smart subsidies; if we're going to call upon the American taxpayer or shareholder to invest more in clean energy, it's going to have to be a far more accountable system than exists today.

The last thing I'll say is that we cannot run a far-reaching national research project to discover those new technologies if we are not willing to tolerate failure. The problem we have right now at [the Department of Energy] is we challenge them to achieve breakthroughs, and every time something doesn't work, they get dragged up and humiliated. We have to have an honest conversation which recognizes that part of discovery is failure. The stakes of climate change and energy dependence are high enough that we have to go into these efforts recognizing that we will be devoting resources to technologies that will not pan out, and the trick is to be able to recognize that and move on.

DR: There's been a lot of talk in this campaign from everyone about green jobs. But no one is quite clear what counts as a green job, where these numbers come from, who's going to get them. Is there hard thinking going on about this in the campaign, or is it an aspirational thing?

JG: It's an important question. The campaign believes that this is a significant aspect of the government's role in helping to make sure that this transition to a low-carbon economy actually works. But it has started to take on a bit of a cliche factor in the public discourse.

Sen. Obama is somewhat unique in not implying that this radical transformation of our economy is just going to be easy, or that stocks are only going to go up. There are going to be significant changes within the manufacturing sector. Those will be painful for some people. The "green jobs" notion as it is casually expressed is meant to push against the irresponsible assertions of the last decade, that moving toward a low-carbon economy will be universally burdensome and negative. We believe that there will be big challenges and big opportunities, and the trick is to make sure that we're not exporting jobs and importing carbon, that we are making changes within the manufacturing sector but not suggesting a nation without a manufacturing sector.

The question is what transformations within the manufacturing sector need to be supported, so we're not just getting, for example, clean cars; we're also restoring greater technological facility to domestic manufacturers, so those clean cars and components are going to continue to be built here. The other component of it is designed to make sure we are exporters of some of these technologies; we've all heard the same stories about the tremendous inventions that have occurred here and been commercialized someplace else. So a big component of Sen. Obama's vision of green jobs is trying to understand what it has been about our technology policy, our manufacturing policy, that has not translated our inventiveness into manufacturing.

And the last component of it is a question about infrastructure and reinvestment. There is going to be a new generation of public investment, an opportunity to rethink, retool, and reconstruct some of our core systems, transportation and others. It's in some ways a tremendous opportunity.

A lot of our focus is looking at the transition. We have a lot of momentum in our system, 100 years of driving us toward energy-intensive manufacturing and transportation systems. The campaign believes that in the early years of that transition, there will be some disproportionate impact on different industries and different regions that has to be acknowledged up front; they're not going to be avoidable, but there are policies that will help fairly and equitably mitigate them.