America’s Renaissance: Energy, Environment, Security, and Global Leadership An Energy Agenda for President Obama’s Second 100 Days

By Joseph Stanislaw

An Energy Agenda for President Obama's Second 100 Days:

• Forge a national energy policy framework guided by successes on greening and clean energy development at the local and state level.


• Put every American and every American home at the center of the effort, mobilizing the country as was done in World War II(“WWII”).


• Assert global leadership by passing a carbon bill—or agreeing to the principles of a framework for carbon—and forging an international consensus.
• Invest in education, basic research, and development for all energy forms, including clean coal (removing CO2) and clean oil.
• Bring the American oil and gas industries to the table as key allies in the transformative Obama energy plan, making them part of the solution to the challenges of job creation, environmental protection, and national security. Recognize that oil and gas are essential in moving to a low-carbon future.

Preface

An American renaissance may be at hand.

In the first 100 days of his administration, President Obama has put energy and environment policy at the heart of plans for America’s future. By arguing for a Green New Deal as the way to combat climate change and lead us out of the economic morass, the President seeks to transform a moment of profound crisis into one of generational opportunity. If he succeeds in marrying reform with recovery, the effort could fulfill an extraordinary triptych of goals: build the foundation for a 21st century economy, assert America’s global leadership, and sharply increase the country’s national security.

But the President’s work has only just begun. In his first 100 days, he laid out an ambitious vision for where we need to go. In the next 100 days, however, he will need to work with various political interests to prevail on precisely how we will get there.

To a significant degree, he can disarm opposition to his plans by underscoring that he will not play favorites on the new energy playing field—and that instead his goal is to set clear, transparent targets and allow all players to compete in meeting them. At its most basic level, his task is to set a price for carbon and then allow the market—not the government—to decide how to get there. And while he may need to compromise, he should be unyielding in hewing to his guiding principle—using reform and recovery together for the future.

Obama had set high expectations almost as soon as he took office, intoning: “We know that the future of our economy and national security is inextricably linked with one challenge: energy.” His February 2009 address to a joint session of Congress echoed the same message. “We know the country that harnesses the power of clean, renewable energy will lead the 21st century,” he said then, before issuing a challenge to the American people. “Yet it is China that has launched the largest effort in history to make its economy energy efficient. We invented solar technology, but we’ve fallen behind countries like Germany and Japan in producing it. New plug-in hybrids roll off our assembly lines, but they will run on batteries made in Korea.”
 

Head Start

Within a month of taking office—and without even passing an energy bill—Obama had demonstrated his conviction. He did it through symbolism, by making fuel efficiency the subject of a presidential directive during his first week. He did it through staffing, by appointing ardent advocates of the environmental and climate change agenda to senior jobs. And he did it through spending. The more than $70 billion allocated to energy and environment projects in the February economic stimulus bill made it “the biggest energy bill the country’s ever seen,” as White House energy and climate czar Carol Browner said.

Obama put it simply: “It is time for America to lead again,” he said in his address to Congress, referring specifically to energy and climate change policy.

Together with Obama’s 2010 budget, released shortly thereafter, the stimulus bill set out an ambitious series of energy goals.

Specifically:

• Create five million green jobs by investing $150 billion in renewable energy efforts over the next 10 years (Congress authorized the development of 130 clean energy technologies).
   
• Double alternative energy production, to cover 10 percent of electricity needs, by 2012, and to 25 percent by 2025.
   
• Implement a carbon trading system that will reduce greenhouse gas emissions by 2050, while also generating $645 billion in “carbon revenues” in the next decade alone.
   
• Update and expand the nation’s energy infrastructure, focusing specifically on building an electricity grid that can better integrate renewable energy.
   
• Promote energy efficiency by, among other measures, retrofitting buildings so they sip rather than chug energy, and upgrading public transport systems.
   
• Invest heavily in energy R&D, with $8.8 billion in the stimulus bill alone, including $800 million for clean coal, $1.5 billion for industrial carbon capture, $800 million for biomass, and $400 million for geothermal.

Already, this is a huge list—but the President could add two more critical items to his agenda.

First, he will need to engage the American oil and gas industries. Until now, the administration has treated them almost like pariahs, invoking them only in the context of increasing their taxes and reducing their subsidies. Yet, we cannot cross the bridge to a low carbon future without mobilizing the American oil and gas industries. To accelerate this process, all energy forms, including fossil fuels, should be allowed to compete within a framework set by the government. Also, the oil and gas industries generate hundreds of thousands of highly skilled, high paying jobs—jobs that America must keep at home. These are skills and positions that, once lost, are unlikely to return.

Second, and in a similar vein, the President needs to show his cards on nuclear energy, the proven carbon-free energy source that produces 21 percent of America’s electricity. How does it figure in his vision of America’s energy future? He cannot keep this industry, which must make investments with a 50-year or longer horizon, in limbo for much longer.

In his first 100 days, President Obama laid out an ambitious vision for where we need to go with energy and environment policy. In the next 100 days, he will need to work with various political interests to prevail on precisely how we will get there.

    A True National Project    

Obama has clearly demonstrated a commitment to energy policy: He has named energy as one of his highest priorities and he has signaled to Americans that this is a national—even a global—project. Today, our energy grid, which must undergird any serious push towards renewables, is a patchwork of 140 “balancing areas” meant to help manage the distribution of power, but that is antiquated and largely incapable of accessing renewable sources. Standards for car emissions vary by state, as do building codes, efficiency requirements, and other crucial regulatory frameworks—including goals for the use of renewable energy sources. Regional carbon trading systems are proliferating, including one among 10 northeast states that launched on January 1, 2009. This regulatory tangle deters investors by fracturing the American market.

But, curiously, this fractured approach also has laid the groundwork for Obama’s energy crusade, by encouraging rife experimentation at the state and local levels. Generally, while Washington took a “skeptical” approach to climate change in the past, eschewing a focus on advancing efficiency or renewable sources, the states led a veritable revolution in innovation and regulation.

For example, the U.S. as a whole lags Europe in green metrics: Each American is responsible for 20 tons of CO 2 emissions each year, versus 8.4 tons per European. Paradoxically, however, many U.S. states are actually at the vanguard of the green revolution. California emits 20 percent less CO 2 per dollar of GDP than does Germany, and generates 24 percent of its electricity from renewables, far more than Japan’s 11 percent and Germany’s 15 percent. It also has one of the world’s largest solar plants, the largest wind farm, and the most powerful geothermal plant. A recent bill sets 2020 as the state’s target for every newly built home to be “net zero” in its carbon emissions. New York has even lower per capita emissions than does California. In fact, 11 U.S. states are cleaner than Germany. Meanwhile, 28 states have adopted renewable portfolio standards.

But the time has come to tie it all together, and to balance it all out. Obama’s challenge now will be to create a truly national framework on energy, and an international framework on climate change. The administration’s stimulus bill, budget, and rhetoric appear to have sent the right signals and strike the right tone—but can we turn this into a symphony? Can we set a national price for carbon and national goals for renewable energy sources?

Balancing is needed: In arguing for his energy plan, Obama has had a tendency to emphasize the environmental prerogative over the other two legs of the “green society” triptych—the creation of enduring, local jobs and the enhancement of national security. He could give equal measure to all three. There are many compelling reasons for doing this, but one above all: The army for the green revolution is not the energy companies, or the research community, or federal agencies, or even venture capitalists—it is the American people. If a new energy culture is to emerge, it needs to start at the grass roots—and in the American home.
 

The Home Front: Three National Projects that Enlist Every American

One reason for focusing on the American home is because it offers the lowest-hanging fruit when it comes to energy efficiency. But far more importantly, by focusing on the home, the President will clearly telegraph the point that this is a project that involves every single American, every day, and in every one of their actions. And perhaps above all: The home front is the job creation nexus of the Green New Deal. While investments in renewable energy technologies can create millions of jobs over time, it is the home front—weatherization, retrofitting, the electricity grid, etc.—that can generate jobs today.

In this respect, the effort resembles another one that also led the country out of an economic catastrophe—the Second World War. Like WWII, this is a comprehensive national effort. It could add substantially to GDP and support the achievement of full employment. As in the 1940s, massive public investment is at the heart of the effort—weatherization, conservation, mass transit, renewable power, and a smart grid. If handled carefully—say, with a new program of deferred claims to future purchasing power like war bonds—the incomes earned by dealing with energy security and climate change have the potential to become a foundation of restored financial wealth for the middle class (an idea proposed by the economist James Galbraith). The impact of a generation-long “green war” has the potential to be more enduring than the economic revival spawned by WWII: It could generate a second and third generation of green action whose effects would be felt throughout the 21st century, propelling us forward to more and better green technology and environmental improvements.

The WWII analogy gets at the scale of the effort we need, and it weaves it into every American’s daily experience.

A home-based energy policy was hinted at in the Obama administration’s first moves, including the stimulus bill’s allocation of $5 billion for weatherization. (This was “twinned” with $4.5 billion to retrofit public buildings, and another $4 billion to “green” public housing.) Now we could go much further by pursuing national standards that revolve around the home. The President could consider three major home-based initiatives in the next 100 days:

1. Draw on California’s “zero net carbon” homes legislation and set a similar national target.
    
2. Expand incentives for retrofitting homes with green technologies, from smart meters to double-glazed windows.
    
3. Consider underwriting both efforts by tying the financial bailout to the green economy; e.g., by requiring mortgage lenders to provide “green mortgages” that offer reduced rates for homeowners undertaking investments to increase efficiency.

The home is the locus of another major national energy reform, this one located in the garage—where the American automobile resides. Again, the administration can wed reform with recovery. In working with domestic auto makers on their economic future, the administration will have to face industry-wide issues of auto emissions and fuel economy guidelines. A transformed auto industry can provide hundreds of thousands of skilled jobs—in both the auto and clean-energy fields—that could otherwise disappear forever from America. Said White House energy and climate czar Carol Browner in February: “The hope across this administration is that we will have a unified national policy when it comes to cleaner vehicles.”

Within the next 100 days, the Obama administration can signal clearly what it expects on the home and automobile fronts—thus energizing every American and conscripting them into this generational battle.

The home is also central to efforts to transform our energy grid, for which the stimulus bill already provides $4.5 billion. Until now, like so many aspects of our energy policy, efforts to rebuild the energy grid have been long hampered by local resistance. This, too, must become a national project. Because the grid reaches into every home, there is a role for all Americans to play here as well. By promoting smart meters and smart tariffs, as well as other innovative efforts like Google’s PowerMeter and SmartGridCity in Boulder, the administration can both ensure national participation and save massive amounts of energy. Improving the grid’s communication capabilities alone could increase transmission efficiency by 50 percent, without adding a single wire. Going further, the administration could also ensure that enterprising American consumers and businesses who outfit their homes and offices to produce electricity—through roof-top solar installations, for instance—have a ready market for excess output. National regulations on feed-in tariffs would potentially be another way to accomplish this.

The army for the green revolution is not the energy companies, or the research community, or federal agencies, or even venture capitalists—it is the American people.
 

Abroad: Reasserting American Leadership

Another immediate priority of the next 100 days is for the administration to use its political and diplomatic powers to work to ensure that the global climate change negotiations scheduled for December 2009 in Copenhagen succeed. The single best way to do this would be to forge consensus on a domestic carbon bill to use as an international bargaining chip. Short of this, the administration will have to show determined leadership in designing a framework of ideas and principles on carbon that can attract the support of, especially, China and Canada.

The business community is resigned to the fact that a price for carbon eventually will be set. In the absence of federal carbon legislation, American industry does not know where to make investments. Says Browner: “Even in this down economy, it’s better for us to know what’s going to be expected in terms of how we use energy, in terms of greenhouse gas emissions, so as we come through the recovery we can plan for all that. Give us our marching orders.”

Carbon legislation is no sure thing, despite the progress that is being made in this direction. The President’s budget already assumes $645 billion in carbon revenues from a cap-and-trade system. Meanwhile, the Environmental Protection Agency (“EPA”) in March 2009 deemed greenhouse gases as officially dangerous, thus providing an additional spur for Congress to pass legislation (rather than allow the EPA to regulate emissions by fiat). But the President will have to expend major political capital, especially in a recession, to overcome concerns that federal carbon legislation will make energy more expensive in a time of recession. The linchpin will be how that $645 billion is spent; enough of it will need to go to offset industries and individuals impacted by the system if the President is to have success with Congress.

As painful as it might be, it is essential that federal carbon legislation pass this year if the U.S. is to use it as leverage to assert America’s leadership role in Copenhagen. The administration could use its willingness to promote carbon legislation, as well as a national renewable portfolio standard, to forge a climate consensus with China. One key to this will be to send a clear signal to the developing world that the U.S. will lead in efforts to both develop and transfer clean energy technologies—including in legacy energy fields, especially coal (which is fundamental to China’s future). Energy Secretary Steven Chu already has shown interest in establishing a larger portfolio of research plants with other countries.
 

After Summer

Come August, when his first 200 days are completed, the President’s efforts to enact his energy vision could be playing out on three legislative fronts: with a bill on carbon, another on a renewable portfolio standard, and a third wide-ranging energy bill. As the administration plans for the inevitable horse-trading, it must develop a strategy to protect its highest priorities, including:

• Carbon legislation, as discussed earlier
• An ambitious, national renewable portfolio standard
• The funding of basic and advanced research, and the training of college students in fields related to clean and renewable energy; the establishment of the Advanced Research Energy Agency with stimulus funds was an innovative move that should be built upon.
• A “Clean Energy Bank” that can overcome the mind-boggling bureaucratic hurdles that have prevented available funds from being distributed by the government either as loan guarantees or subsidies to help develop clean energy and efficiency technologies.
• A prominent role for the legacy fossil fuel industries—oil, gas, and coal—with an emphasis on developing cleaner forms of these fuels .
• The creation of a White House task force that can determine how best to create a new green energy “culture” in America, starting with education at the primary level

Above all, the administration should be guided by a fundamental three-part vision: to create a set of goals with respect to carbon emissions; to establish clear and transparent rules of engagement; and then to allow any and all players to compete for market share and funding.

Dr. Joseph A. Stanislaw is founder of the advisory firm The JAStanislaw Group, LLC, specializing in strategic thinking, sustainability, and environmentally sound investment in energy and technology. He is an independent senior advisor to Deloitte’s Energy & Resources Group. As an energy industry leader, advisor, strategist and commentator, Dr. Stanislaw advises on future trends in the global energy market.

Dr. Stanislaw was one of three founders of Cambridge Energy Research Associates in 1983 and served as managing director for all non-U.S. activity until 1997, when he was named president and chief executive officer. He is an adjunct professor in the Nicholas School of the Environment and Earth Sciences at Duke University, where he is a Member of the Board of Advisors for the Nicholas Institute for Environmental Policy Solutions. Dr. Stanislaw was a Research Fellow of Clare Hall and lecturer in Economics at Cambridge University, where he was also a member of the Energy Research Group in the University’s Cavendish Laboratory. He was a senior economist at the Organization of Economic Cooperation and Development’s International Energy Agency in Paris.

Dr. Stanislaw is co-author of The Commanding Heights: The Battle for the World Economy. Now in the second edition, the book has been translated into 13 languages and made into a six-hour documentary on PBS. He is also the author or co-author of numerous reports and published papers on the geopolitics and economics of future energy supply and demand, including Energy in Flux: The 21st Century’s Greatest Challenge, and he is featured in the public television documentary, Oil ShockWave.

Dr. Stanislaw received a B.A., cum laude, from Harvard College, a Ph.D. in Economics from the University of Edinburgh, and was awarded an M.A. from the University of Cambridge. He is one of only several people to have been awarded an Honorary Doctorate and Professorship from Gubkin Russian State University of Oil and Gas in Moscow.

Dr. Stanislaw may be contacted at jas@thejastanislawgroup.com.