CQ WEEKLY
– IN FOCUS
Oct. 4, 2008 – 3:49 p.m.
Issues: Energy: The Price of Being Green
By Avery Palmer, CQ Staff
Judging from the polls, it would seem that the high price of gasoline is the most visible — and some would say urgent — energy issue facing Washington in the coming year. With pump prices at the top of voters’ concerns, the new administration could face extraordinary pressure to respond.
But fuel prices are only one side of the energy equation. For starters, most experts agree there is little any president can do in the short term to lower the price of gas. Congress has lately been pushing to expand offshore drilling, but it would take years for oil companies to set up a new infrastructure in ocean waters, and even then the volume of new production would be small in proportion to the world market. Encouraging alternative energy sources is also a long-term proposition. As a result, it’s quite possible that consumers will still be clamoring for relief at the gas pump when the next presidential election comes along in four years.
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The problem is that this pressure comes at the same time the next president will be confronting a staggeringly complex environmental problem: global climate change. This issue has rarely come up on the campaign trail in recent months, but it will almost certainly rise to the surface in the coming years. That’s because both John McCain and Barack Obama have pledged to set a cap on greenhouse gas emissions that scientists conclude are warming the planet. This would mark a complete reversal from the Bush administration’s opposition to any mandatory emissions limit, a policy that has made the United States an outlier among most other developed countries. Many scientists warn the consequences for the planet could be catastrophic if industrialized countries do not begin to lower emissions over the next few years.
The conundrum for the next administration is that any plan to address global warming would, almost by definition, make gasoline and electricity more expensive. The most commonly proposed and discussed approach, known as “cap and trade,” is to put a price on traditional, carbon-emitting fuels to encourage a market for alternatives.
“The solutions almost go in opposite directions,” said Henry Lee, lecturer in public policy at Harvard’s Kennedy School of Government.
In fact, some experts say the silver lining behind high gas prices is a more favorable climate for investments in renewable energy. “Most climate change advocates would argue that what we want to do is not lower gas prices, but raise them,” said Charles Ebinger, director of the Energy Security Initiative at the Brookings Institution.
But a new gas tax would probably be dead on arrival in Congress, and any climate change proposal is fraught with peril. Predictions of even a small increase in energy prices could open the door for opponents to argue it would lead to economic disaster.
“Three or four months ago, I would have told you that there’s a high likelihood that a cap-and-trade program would pass the Congress. I’m not so sure anymore,” Lee said. “We’re asking people to pay costs now for benefits 20 years from now, and politically that’s very hard to do.”
Costs and Benefits
Indeed, when the Senate briefly debated global warming legislation in the summer, one of Bush’s main points in opposition was that it would raise the cost of filling the tank. It appeared to matter little that the Bush administration’s own analysis showed the effect on gas would be an extra 53 cents by 2020, which is a fraction of the increase at the pump over the past few years.
To be sure, the economic implications of a climate change proposal would extend far beyond the price of gas. The impact on electricity prices is expected to be larger, and it could encourage drastic changes in the way Americans obtain their energy. For the next president’s plan to combat global warming to succeed, he will need to convince the public that it will not be harmful to the pocketbook.
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Issues: Energy: The Price of Being Green
“People are going to be leery of doing something that can be portrayed as a tax increase,” said Bush’s first EPA administrator, Christine Todd Whitman, who has since helped to found the Republican Leadership Council, which espouses a “big tent” GOP.
McCain or Obama would have numerous options for how to soften the economic impact of any climate change plan. One strategy is to use the revenue the government obtains from a cap-and-trade program to fund consumer rebates, energy efficiency programs or energy technology research. Another is to establish a “safety valve” that sets an absolute limit on the price of emissions. That is anathema to many advocacy groups, since a safety valve would also limit the environmental benefits. However, it could prove necessary to reach a political compromise that could make it through Congress.
Advocates say that in order to address climate change, it will be essential for the president to make it one of his top priorities. Otherwise, it could be difficult to tackle the issue, with so many more immediate problems on the table. Of course, the president also would have to overcome political opposition to a cap-and-trade policy from those who favor a voluntary approach.
“A president who cares about this issue will be better able to turn the public’s attention to what is really a very dire situation,” said Manik Roy, director of congressional affairs for the Pew Center on Global Climate Change. Even if gas prices are still at the top of the agenda, he said, “the question is whether they’ll have the stopping power with climate legislation that they do today.”
It is also likely that the president will try to frame a climate change plan as part of a broader energy strategy, which could include both investments in alternative sources and increased production of fossil fuels.
“Ultimately, to be successful, oil security and climate change advocates need to join hands as frequently as possible,” said Paul Bledsoe, communications and strategy director for the National Commission on Energy Policy.
Such an integrated approach may be essential to win support from Congress. Energy legislation is notoriously difficult to pass because of regional differences that drive wedges inside both parties. Gulf Coast lawmakers tend to support increased oil drilling, for example, while politicians from Appalachia have an interest in protecting the coal industry.
“We have to do something, when we do it, that drives our economy, that adds to our GDP, that makes us more energy secure and deals with climate at the same time,” said Republican Bob Corker of Tennessee, who is considered one of the swing votes in the Senate on global warming legislation.
Both presidential candidates have embraced this comprehensive approach in their campaign platforms. Obama has pledged to spend $15 billion a year on clean energy technologies using revenue from a stringent cap-and-trade program. He would also establish new mandates and incentives for energy efficiency and renewable energy, while promoting oil and gas drilling in some parts of the United States.
McCain has spent much of his time on the campaign trail calling for expanded offshore drilling, but he was also an early Republican supporter of cap-and-trade legislation. He has proposed a cap-and-trade plan that is less stringent than Obama’s and offers more flexibility for businesses. McCain wants to encourage the market for low-carbon energy and offer a special prize for inventors who develop battery technology for electric cars.
Alternative Sources
The two candidates differ on the role of nuclear power plants, which could be an integral part of a climate change policy because they do not emit greenhouse gases. McCain, a strong advocate for the industry, wants to encourage the construction of dozens of new nuclear plants in the next two decades. Obama, taking a more cautious approach, argues that a first step should be to figure out how to store nuclear waste safely.
Both candidates have signaled they want to promote research on advanced technology for coal-fired power plants, which now provide a huge portion of America’s electricity but also contribute to global warming. The industry is clamoring for federal money to research carbon sequestration technologies that may or may not prove commercially viable.
Issues: Energy: The Price of Being Green
The next president also will have to decide which policies are appropriate to encourage renewable energy, biofuels and energy efficiency technologies to get out into the market. One controversial option is to establish federal mandates for the production of alternative fuels. And transportation policy will be another avenue for debate when Congress takes up a new highway bill next year. Environmentalists will push for a greater percentage of federal funding to go to public transit instead of highways.
But in a time of consumer panic over gas prices and a struggling economy, it will be a tall order for the next president to lay out a long-term strategy to both secure reliable supplies of energy and address global warming.
However, such a broad vision of the future will be essential for the president to confront the nation’s energy challenges successfully, said David Jenkins, government affairs director at the group Republicans for Environmental Protection.
“If people really understand the energy dynamic that we face, they understand that reducing our dependence on fossil fuels in the long term is really the way to reduce our energy prices.”
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