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No Shortage of Energy Policy Advice for Obama Administration

With more than two months to go before inauguration day, the incoming Obama administration, which has promised a change of direction for the nation's energy policy, is being inundated with a flood of advice -- some of it contradictory -- from a variety of sources.

Candidate Barack Obama said he would ensure 10% of electricity would come from renewables by 2012 and 25% by 2025; invest $150 billion in private efforts to build a clean energy future; implement a cap-and-trade program to reduce greenhouse gas (GHG) emissions 80% by 2050 and put one million plug-in hybrid cars on the road by 2015. But President Obama, faced with a global economic slowdown and the varied political interests of the incoming 111th Congress, may be forced to rework some of his pre-election energy policy proposals.

In a statement issued Thursday, the leaders of the American Wind Energy Association, Geothermal Energy Association, National Hydropower Association and Solar Energy Industries Association outlined key policies they say the new administration must adopt, including at least a five-year extension of the federal renewable energy production tax credit, adoption of a cap-and-trade program, a $30 billion investment in renewable energy technologies and adoption of a renewable portfolio standard (RPS) ensuring that at least 10% of electricity come from renewable sources by 2012 and at least 25% by 2025 -- recommendations neatly in line with Obama's campaign pledges.

But a Cato Institute study of state-level RPS released last week found that they have not made good policy -- "environmental, economic or otherwise" -- and advised against implementation of a national RPS, which the Cato Institute said would "create a stark fallacy in the pursuit of a 'comprehensive national energy plan,' since it devotes a tremendous amount of economic and policy resources to a single boutique industry. While a national RPS therefore delivers precious little even in theory, the real-life experiences of the states strongly indicate that it delivers equally little in practice."

On Thursday Dow Chemical Co. released its version of a national energy plan in which it called for "a bolder, comprehensive, bipartisan [energy policy] that will help stabilize prices, strengthen the economy, increase security, clean the environment and revitalize U.S. manufacturing." Dow's plan would encourage aggressive energy efficiency and conservation, increase and diversify domestic energy supplies, accelerate development of alternative and renewable energy, and reduce greenhouse gas emissions.

Among the proposals in its energy plan, Dow called for a cost-share program providing direct loans and other assistance to demonstrate commercial-scale polygeneration coal plants; at least a five-year extension of renewable energy production tax credits; acceleration of deployment of nuclear power, including the creation of a workable plan for spent nuclear fuel; and prompt enactment of environmentally effective, economically sustainable climate change legislation. Dow recommended that Congress not reimpose and Obama not reinstate the moratorium on offshore oil and natural gas drilling that President Bush and the current Congress lifted in September (see NGI, Oct. 6).

Even before the economic turmoil, Dow announced that skyrocketing energy, feedstock and transportation costs were forcing the company to raise the price of all of its products by up to 20% in May (see NGI, June 2) and by as much as an additional 25% less than a month later (see NGI, June 30). At the time the company also urged Congress to rein in energy markets and focus on sound energy policy going forward. Over the past five years, Dow's bill for hydrocarbon feedstocks and energy has surged four-fold, from $8 billion in 2002 to an estimated $32 billion-plus this year.

The Center for American Progress Action Fund (CAPAF) is calling for a "green" economic stimulus and recovery package, claiming that government spending "directed toward renewable energy and energy efficiency would result in more jobs than spending in most all other areas." CAPAF's Strategy for Green Recovery calls for $100 billion in federal funding -- and an additional $20 billion in private capital leverage through loan guarantees -- for energy efficiency and renewable energy programs.

And the U.S. Chamber of Commerce is scheduled to release its own "Energy Transition Plan" for Obama and the next Congress on Monday (Nov. 17), an energy policy road map with more than 80 recommendations, expected to affirm the Chamber's previous call for the private sector, rather than government, to take the lead in modernizing the nation's energy infrastructure.

Some predictions for the kind of reworked energy policy that may come from the new administration have painted a picture of green-oriented legislation quite unlike the pro-industry positions of the Bush administration. The Wall Street Journal last week said Obama is likely to put his stamp on energy policy early by using his executive authority to block new oil and natural gas leases on environmentally sensitive lands in Utah (see related story).

The retirement of some senior lawmakers and the change in party leadership has left the oil industry with few "natural defenders" left on Capital Hill, according to researchers at Friedman, Billings, Ramsey & Co. Inc. (FBR). A review of the incoming administration and potential nominees to energy-related posts reveals "a significant majority that...strongly advocates for alternative energy and a meaningful complement of strong critics of fossil fuels," according to FBR. At the same time, FBR foresees "a Senate that stays largely the same in its energy policy orientation (from the perspective of key decision-makers at legislative choke points): largely pro-coal, anti-oil, nationally neutral on alternatives with strong regional biases toward ethanol/biofuels, wind and geothermal power, and transportation efficiency (read: automakers)."

The American Council for an Energy-Efficient Economy (ACEEE) said it expects energy efficiency to be addressed in an economic stimulus bill -- which the ACEEE said could be passed as early as this month by the outgoing Congress -- and believes there is "a very good chance" that an RPS will be enacted as part of an energy bill in 2009, while climate change legislation may have to wait until 2010 or 2011. "Such a bill is likely to be a cap-and-trade bill, calling for an 80% reduction in emissions below 1990 levels by 2050," according to ACEEE.

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