The Stealth Green Revolution

by Joshua Green

A hundred years from now, Barack Obama's first hundred days may be remembered more for his energy policy than for his bank bailouts-at least if things go according to plan. Without a great deal of fanfare or attention, Obama has made significant progress toward overhauling our national energy policy on a scale that's never before been attempted.

For the last century or so, the government's approach to energy, especially electricity, has been to encourage its production as plentifully and cheaply as possible. This has been achieved mainly by burning fossil fuels, which, as we all now know, has created a wee problem in the form of massive carbon emissions that are heating up the planet and threatening catastrophe. On the campaign trail, Obama pledged to move the United States to a greener economy (thereby vastly reducing the amount of greenhouse gas emissions), and in so doing, serve as an example to developing countries like China and India which, along with the United States, are the world's major carbon emitters.

Like so much else, Obama's energy plan has been overshadowed by the financial crisis. That has affected the sales pitch-though not the substance-of what he's attempting to do. Obama's plan can be thought of as having three major components: the federal energy incentives, the energy bill that Congress will tackle this summer, and the carbon cap-and-trade system featured in his budget and in legislation recently introduced by House Energy & Commerce Chairman Henry Waxman.

Obama cannily used the stimulus to push through the first part of his plan. Though it was sold as a "jobs" package to goose the economy, it was also a massive down payment on his energy agenda, since it included $38 billion in grants and $127 billion in loan guarantees to support "clean" technology. With all the billions and trillions Washington is allotting to this or that ailing bank or insurance company these days, it's important to have some perspective on how big a figure $38 billion really is when you're talking about energy. According to a recent study by the consulting firm Management Information Services, between 1950 and 2006, the government disbursed about $725 billion in federal energy incentives, mostly to oil, coal and gas. Renewables like wind and solar received only $45 billion. Give or take a few billion, Obama had matched that by Day 29 of his administration.

Of course, spending money is the easy part. Hereafter, things will get a lot harder. The energy bill is expected to mandate that a certain percentage of U.S. electricity come from renewable energy sources, which will move things further in the direction Obama is trying to go. Since "renewable portfolio standards," as they're known, are already in place in more than 30 states, it doesn't seem like too much of a stretch to expect that a Democratic Congress will pass some form of them. Whether or not the standards will have a significant effect will depend on how aggressive they are.

Passing a cap-and-trade program, on the other hand, will be a much tougher sell, since putting a price on carbon raises the cost of fossil fuels and threatens jobs in politically powerful oil- and coal-producing states. What's more, the nation's largest industry, electric utilities, relies heavily on coal and is not thrilled at the prospect of having to pay (and pass along to customers) what amounts to a tax on carbon emissions. In recent years, the utilities have paid lobbyists more than $20 million annually and are going to set them to the task of thwarting Obama.
To pressure Congress to act, Obama's EPA recently ruled that carbon dioxide is hazardous and can be regulated under the Clean Air Act. That will help. But what makes this such a hard fight for Obama and his congressional allies is that energy issues tend to be regional, rather than inter-party, fights, which mitigates the advantage of having large Democratic majorities. In fact, the fight two decades ago to pass the Clean Air Act amendments (which included a cap-and-trade system for the sulfur emissions that cause acid rain) is a good indicator of where the battle lines will be drawn. Then, as now, Midwestern Democrats were the main impediments. The environmentalists eventually prevailed-but it took them a decade.

If Obama can pull off all three components of his plan-and that's an awfully big "if"-he'll have gone a long way toward radically redirecting U.S. energy policy in a way that could end up being pivotal. The administration's hope is that when historians (or Al Gore XIII) look back many decades from now, they'll identify the early Obama years as the point at which the United States changed its energy policy and put the country, and maybe the world, on a better course. Looking back at the last hundred days, the verdict is "one down, two to go."