Obama's "Apollo Project": New Energy Economy "My No. 1 Priority

By Patrick Von Bargen
October 23, 2008

Oil prices may be following the economy down, down, down, but the likely next president's commitment to the development of energy alternatives is a dead-lock certainty. It's time to wake up and understand that the federal government - which just became the biggest player in the U.S. banking industry - will make its next big move into venture funding of a New Energy Economy.

In a Time Magazine article published today, Joe Klein quotes Senator Barack Obama as saying he wants to launch an "Apollo project" to build a new alternative-energy economy. His rationale for doing so includes some hard truths about the current economic mess: "The engine of economic growth for the past 20 years is not going to be there for the next 20. That was consumer spending. Basically, we turbocharged this economy based on cheap credit." But the days of easy credit are over, Obama said, "because there is too much deleveraging taking place, too much debt." A new economic turbocharger is going to have to be found, and "there is no better potential driver that pervades all aspects of our economy than a new energy economy ... That's going to be my No. 1 priority when I get into office."

Stakeholders in the energy sector should begin to think now about how they would contribute to this priority should an Obama Administration become a reality.

• What experience and expertise does my company or organization have that could make this new energy "Apollo project" successful for the country and for our part of the industry? 
• Should I join forces with similarly situated companies and organizations to amplify the power of our message to the new administration and Congress?   
• Among the many and various pieces that may be part of this new energy economy initiative, which ones are the highest priority for my company or organization?
• How do I develop a strategy based on these priorities to ensure that policymakers shape those pieces in ways that both achieve the new administration's objectives and also enhance the future prospects for our part of the energy sectors?

As a starting point, it might be helpful to review what Obama has said so far about how he would do to achieve his goal. Contrasting Obama's energy program with McCain's brings his key proposals into focus.

Common ground. Both Obama and McCain support new initiatives in energy efficiency; upgrading the electricity grid; research, development, and deployment of renewable energy sources; clean coal technologies, including carbon sequestration; and reforming the transportation sector with strong CAFE standards, plug-in electric vehicles, and "flex fuel" vehicles. Senator Obama's proposals include much more aggressive government support for many of these initiatives, while Senator McCain has tended to rely on encouraging the market through tax breaks and credits.

What about cap-and-trade? Both candidates support implementing a "cap and trade" system for carbon emissions. Senator Obama's plan implements an auction system for carbon credits; Senator McCain would award credits to companies, though he has suggested he would be open to eventually moving towards an auctioning system. Senator Obama proposes more drastic cuts in greenhouse gases as well, hoping to cut emissions to 80 percent below 1990 levels by 2050. Senator McCain has called for an emissions reduction to 60 percent below 1990 levels by 2050.

Nuclear and oil. Both candidates support an expansion of nuclear energy, but McCain is much more aggressive on this count, proposing 45 new nuclear plants by 2030, while Senator Obama has said he will not build new plants until advancements have been made in nuclear waste storage and disposal. And while both candidates understand the continued importance of oil and gas to achieve energy independence, their approaches differ. McCain supports removing most constraints on off-shore drilling, whereas Obama is much more cautious, emphasizing instead getting the most out of current oil fields through enhanced oil recovery methods using CO2, removing delays in current permitting, supporting the Alaska natural gas pipeline, and insisting on a "use it or lose it" approach to existing leases. Obama proposes a tax on oil company profits to pay for an energy rebate to consumers, whereas McCain opposes any windfall profits tax.

Highlights of the Obama Energy Plan:

• An energy rebate of $500 for individuals and $1,000 for married couples, which would be funded by a windfall profits tax on oil companies.
• Expanded domestic oil production with a "use it or lose it" policy and enhanced oil recovery technology.
• Instruct the Department of Energy to enter into public private partnerships to develop 5 coal-fired plants with carbon capture and sequestration.
• Reduce emissions to 80 percent below 1990 levels by 2050 and increase fuel economy standards by 4 percent every year.
• Invest $150 billion over ten years into the clean energy sector.
• Provide a $7,000 tax credit for the purchase of advanced technology vehicles. Implement a federal Renewable Portfolio Standard (RPS) that requires 10 percent of the electricity consumed in the United States to be from clean energy sources by 2012 and 25 percent by 2025.
• Require all new buildings to be carbon neutral by 2030.
• Decouple energy utility company profits from increased energy usage.

Who drives the agenda? It is fair to say that the Obama campaign has come up with more specific policy ideas on each of these issues than the McCain campaign has published. It is probably also fair to say that an Obama administration will naturally respond to its "green," labor, and technology constituencies with a more aggressive agenda - in terms of priority, urgency, and emphasis -- on those parts of their energy policy supported by these groups than a McCain administration would. Finally, it is likely that the increased Democratic majorities in the House and Senate will follow Obama's suit in this respect, even if he is not the eventual winner of the presidential race.

Does the economic situation change the published agenda? The cited paragraph from Joe Klein's article shows that Obama will use the recent downturn of the American economy as one big driver for his new energy economy program. Clearly, the proposals above that are likely to create jobs and increase investment will be pushed ahead of ones that are costly to the economy. Two unanswered questions loom.

First, if Obama is elected and he works with Congress as President-Elect on a stimulus package in November and December, will that stimulus package include any of his "new energy" initiatives?

And second, will the economic situation preclude fast action on cap-and-trade legislation, which could impose additional costs on the economy? Some argue that the economic situation will necessarily require a postponement. Others argue that passing a cap-and-trade framework that in effect contemplates a minimum price on carbon early in the next administration would actually spur economic growth based on clean technology, alternative fuels, and energy efficiency, even if the specific emission limits were set to kick in at a somewhat later date.

The Congress and Obama's No. 1 Priority

If Obama is elected, the Democratic chairs of the relevant committees in Congress will feel some need to communicate and collaborate with their new president and his administration, and his leadership on timing and substance of the energy agenda will have a greater impact. But let's review what the Congress has done in the past year as partially setting the table for the new administration's agenda.

Cap-and-Trade Bills. Over the summer, there were a number of bills that dominated energy legislation discussions. The Lieberman-Warner bill (S. 3036) and the Bingaman-Specter bill (S. 1766) - both addressing global warming with "cap-and-trade" systems -- were the focus of Senate debates.

On the House side, Congressman Edward Markey (D-MA), the Chairman of the House Select Committee on Energy Independence and Global Warming, introduced his global warming bill (H.R. 6186) in June that would have directed the EPA to establish a program to reduce greenhouse gas emissions. In July, several members of the Ways and Means Committee led by Lloyd Doggett (D-TX) introduced their own cap-and-trade global warming legislation (H.R. 6316). However, a new bill, introduced just on October 7 by House Energy & Commerce Subcommittee on Energy and Air Quality Chairman Rick Boucher (D-VA) and full committee Chairman John Dingell (D-MI), will likely play a significant role in the energy and environment debate in the next Congress.

The draft released by Congressmen Boucher and Dingell is a cap-and-trade energy bill that aims to cut greenhouse gas emissions by 80 percent of 2005 levels by 2050. Of particular note, the bill leaves out the "safety valve" proposed in the Bingaman-Specter legislation that would have limited the price of the emission allowances that business would buy and sell to comply with the bill. The Boucher-Dingell bill will likely serve as merely a jumping off point for future energy legislation, and there will undoubtedly be significant debate in congress as to what the final bill will look like.

The Energy Provisions of the Financial Rescue Bill. As highlighted in our QGA Insights bulletin of October 3, the Emergency Economic Stabilization Act of 2008 has further altered the energy landscape for 2009. The Senate version of the financial rescue legislation had attached to it a tax-extenders package containing numerous energy provisions, including renewable energy incentives, provisions for carbon mitigation and coal, and transportation and energy conservation credits.

Having enacted these extensions and provisions in 2008, the new Congress and new administration will have more flexibility than they otherwise would have had in the timing and content of their energy initiatives. The course set by the new president - either in concert or conflict with the leadership of the Congress - will determine the pace of new energy legislation in 2009.

ABOUT the Author

Patrick Von Bargen joined Quinn Gillespie & Associates in October 2008. Patrick joins QGA after having served in major public policy roles over 17 years in Washington, including as Chief of Staff to Senator Jeff Bingaman (D-NM) from 1987 to 1999 and Managing Executive for Policy & Staff for Chairman William H. Donaldson (R-NY) at the Securities & Exchange Commission from 2003 to 2005. He also headed the National Commission on Entrepreneurship and served as Vice President of the Council on Competitiveness, the only national organization whose membership is comprised exclusively of CEOs, university presidents, and labor leaders focused on American economic competitiveness issues.

Patrick's experience covers a range of public policy areas from clean energy technology development and deployment to the operation and regulation of the financial markets. In his role as Chief of Staff to the now-Chairman of the Senate Energy Committee, Patrick worked closely with Senator Bingaman on energy-related technology issues, including the enactment of the National Competitiveness Technology Transfer Act which changed the very mission of the DOE National Labs and for the first time allowed commercialization of their federally funded research and development efforts.

Patrick's private sector career has given him extraordinary insights into the innovation economy. He served three years as CEO of the Center for Venture Education's Kauffman Fellows Program. In this last role, Patrick saw first-hand the explosion of clean technology start-up and venture capital activity in Silicon Valley and has worked closely with this community in developing a cleantech policy agenda for the future.

ABOUT QUINN GILLESPIE & ASSOCIATES

Quinn Gillespie & Associates (QGA) provides public affairs counsel to leading corporations, coalitions and trade associations. One of the only firms to integrate lobbying and communications services, QGA's team of nearly 30 professionals bring a bipartisan, multi-disciplinary approach to helping clients successfully manage public affairs challenges. For more information, please visit www.qga.com or contact Stacey Morton Bowlin at 202-429-6879.