Energy Issues To Get Boosts From Obama
As president, Barack Obama will introduce policies to broadly alter the US energy landscape.
These initiatives will be driven primarily by a much greater concern for the environment than the previous administration and policies that foster energy independence. Obama’s public positions point to a desire to reduce dependence on fossil fuels while increasing the emphasis on renewable energy. New technologies to create advanced biofuels, increase energy efficiency and lower greenhouse gases will also be favored.
The main policy proposal is for a climate change bill that would cap emissions such as carbon dioxide, and auction greenhouse gas credits to encourage a move away from high-emitting industries to low carbon alternatives. Major components of the policy would include support for renewable energy, increased use of natural gas, plug-in hybrid vehicles, and advanced electricity transmission. Obama has proposed that $150 billion from the emissions auction be used to fund low carbon alternatives.
Policy Measures
Obama’s administration is likely to strive to reduce the emphasis on foreign oil, block drilling in new offshore areas, and propose tapping the Strategic Petroleum Reserves for domestic refinery use. Plug-in hybrid cars will be promoted as a way to reduce petroleum use, and oil companies may face a “windfall profits tax” when prices exceed $80/barrel.
Obama supports expanded use of natural gas and a process to expedite development by eliminating bureaucratic obstacles. His goal is to displace 10 billion gallons of gasoline through natural gas used in vehicles by 2020. He has also said that he will pursue expanded development and use of Compressed Natural Gas (CNG).
Investment in coal-fired generation will suffer under stricter environmental regulations, but Obama is expected to funnel federal money to develop “clean coal” technology and pay for carbon capture. So far, proposals for nuclear energy are vague, but Obama has promoted finding safer ways to use nuclear power and store nuclear waste.
Alternative and renewable energy will get a big boost from Obama. He has been a strong proponent of ethanol since his election to the Senate in 2004. Obama supports the expansion of the ethanol distribution infrastructure, the current ethanol import tariff and the blenders’ tax credit. He will push for hybrid cars and advanced biofuels and proposes $4 billion in tax help to retool factories to make advanced cars on top of $25 billion in loans already committed for this purpose. Consumers would get a $7,000 tax credit for the purchase of advanced cars. We’re likely to see $150 billon in spending over the next 10 years to develop alternative energy sources and plug-in hybrid cars.
Solar and wind should benefit under a federal Renewable Portfolio Standard (RPS), which Obama will most likely push with a Democratic majority in Congress. In terms of climate change initiatives, Obama will aim for an economy-wide cap-and-trade program with few loopholes or industry exceptions. A federal RPS would act as a catalyst to the renewable energy certificate (REC) market and other regional initiatives, resulting in the U.S. moving materially closer to a strict carbon cap-and-trade regime similar to Europe.
Ben Parker is director of national accounts and Addison Armstrong is director of market research, Tradition Energy.
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