Tam Hunt: A Great Day for Renewable Energy

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By Tam Hunt, Community Environmental Council

What does an Obama victory portend for an energy-independent future?

With President-elect Barack Obama closing the deal in a resounding manner, let’s review his proposed energy policies. Obama has long called for action to mitigate climate change and to decrease foreign energy dependence. He has not to my knowledge ever discussed peak oil, but the general rubric of “energy independence” captures some of the key features of the peak oil discussion.

Here’s the summary of Obama’s stated energy policy:

» Provide short-term relief to American families facing pain at the pump.

» Help create 5 million new jobs by strategically investing $150 billion over the next 10 years to catalyze private efforts to build a clean energy future.

» Within 10 years save more oil than we currently import from the Middle East and Venezuela combined.

» Put 1 million plug-in hybrid cars — vehicles that can get up to 150 miles per gallon — on the road by 2015, cars that we will work to make sure are built here in America.

» Ensure 10 percent of our electricity comes from renewable sources by 2012, and 25 percent by 2025.

» Implement an economy-wide cap-and-trade program to reduce greenhouse gas emissions 80 percent by 2050.

The day after Obama won his historic race, well-placed commentators were already discussing the likelihood of beefing up these plans. Daniel Yergin, perhaps the best candidate for the energy guru’s guru, said on CNBC that Obama would push hard for a “green economic stimulus” package well over $100 billion. Combined with Congress’ recent enactment of new tax credits for solar, wind, geothermal, etc., it’s looking very good for renewables.

Kateri Callahan, president of the Alliance to Save Energy, announced on the same day that Obama’s plans for cap-and-trade would probably be delayed somewhat in favor of a bill to provide additional incentives for renewables and energy efficiency. I’m inclined to agree that it’s a tough political climate right now for an aggressive national cap-and-trade system, but am keeping my fingers crossed.

Two of Obama’s existing proposals stand out as very promising: his proposed windfall profits tax on oil companies and his call for 100 percent auctions of pollution permits under the greenhouse gas emissions cap-and-trade system he supports.

Ironically, Alaska Gov. Sarah Palin, the Republican vice-presidential candidate and alleged fiscal conservative, recently imposed a windfall profits tax on oil producers in her state. Obama’s proposal would impose a higher tax on oil companies when oil prices exceed $80 a barrel (they’re below $70 now, plummeting from their July peak of $147). This is not a new idea — it was, in another irony, in effect for the duration of President Ronald Reagan’s administration, collecting $80 billion from domestic oil producers.

Obama’s other notable proposal is a 100 percent auction requirement for pollution allowances under a national cap-and-trade system. With 100 percent auctions, the cap-and-trade system acts much like a carbon tax, which economists widely prefer over a cap-and-trade system. Because of the perceived political benefits of cap-and-trade versus a carbon tax (with the “t” word as part its name), it will be important to include as many beneficial features of a carbon tax in the proposed national cap-and-trade program. 100 percent auctions is a very good first step in this direction.

The windfall profits tax and the 100 percent auction requirement will jointly act as a price floor for fossil fuels. This is very smart policy because it acknowledges that the first round of the renewables revolution, prompted by the oil crises of the 1970s, died a sad death in the 1980s as oil and gas prices plummeted. Yet another irony is that oil and gas prices plummeted in part because of U.S. vehicle-efficiency standards, which came into effect aggressively in the late 1970s and ‘80s.

It is highly important, then, that price floors for fossil fuels be ensured. This is an overtly anti-free market policy, but it is quite clear from recent events that free-market fundamentalism has gone the way of the dodo. Revenue from fossil fuel price floors should be reinvested in increased energy efficiency and renewables.

Long-term, there is no doubt that fossil fuel prices will go far higher even than recent price spikes, due to market forces alone. But with the global economy apparently in recession, no one can say where fossil fuel prices are going over the next couple of years. And to maintain momentum on renewable energy, climate change mitigation — and the even more immediate threat of peak oil, it’s imperative that Obama and Congress not lose focus on serious action now. Unfortunately, the American people can be fickle, and with gas prices back to more normal levels, there is a real risk that political will for aggressive energy policies will diminish. We can’t afford to let that happen — again.

California’s energy ballot measures didn’t fare as well as Obama. Proposition 1A, the high-speed rail initiative, passed and this is a great step toward a less oil-dependent transportation system.

But Prop. 7, which would have required utilities to provide 50 percent renewable energy by 2025, was defeated badly. This is unfortunate because the initiative would have provided many powerful incentives for renewable energy. It failed in large part to an aggressive opposition consisting primarily of utilities, environmental groups and the renewable energy industry. The opposition led with a puzzling claim that Prop. 7 would harm small renewable energy companies, which was patently not the case, for a number of reasons.

Prop. 10 was also defeated and this was a positive result. While Prop. 10 had many good features, it was too heavily weighted toward natural gas vehicles. Natural gas vehicles are indeed better in some regards than normal cars, but electric vehicles and plug-in hybrids are even better and these better solutions would have been short-changed by Prop. 10. Environmental groups were united in their opposition to this measure.

In sum, Nov. 4 was a great day for renewables and energy efficiency. Much work remains to be done, but the trajectory is clear: the arc of history bends toward a more sustainable future.

— Tam Hunt is energy program director and an attorney for the Community Environmental Council, and is a lecturer in renewable energy law and policy at UCSB’s Bren School of Environmental Science & Management. Click here for the CEC’s regional energy blueprint.

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