Drilling Down Into the President’s Energy Plans

On April 22, President Barack Obama gave a speech in Newton, Iowa, outlining his energy policies. We are publishing an edited transcript of that speech, interspersed with analysis from the Editorial Pages' A. Barton Hinkle, Todd Culbertson, and Bob Rayner, whose observations appear in bold.

On this Earth Day, it is time for us to lay a new foundation for economic growth by beginning a new era of energy exploration in America.

The choice we face is not between saving our environment and saving our economy -- it's a choice between prosperity and decline.

Perhaps not, but until recently there has been a strong correlation between energy consumption and economic growth. See http://www.pewclimate.org/global-warming-basics/facts_and_figures/ fig18.cfm.

We can remain the world's leading importer of oil, or we can become the world's leading exporter of clean energy. We can allow climate change to wreak unnatural havoc, or we can create jobs working to prevent its worst effects.

Could we create more jobs working to adapt to climate change?

We can hand over the jobs of the 21st century to our competitors -- or we can confront what countries in Europe and Asia have already recognized as both a challenge and an opportunity: The nation that leads the world in creating new sources of clean energy will be the nation that leads the 21st century global economy. America can be that nation. America must be that nation.

The president sets up a series of false choices. Becoming a leading exporter of clean energy, for instance, does not preclude remaining the world's leading importer of oil, particularly because both of those positions involve relations relative to other nations' energy consumption and production. For instance, America might drastically cut its oil importation, but if other nations cut their oil importation even further because they import clean energy that the U.S. exports, then the U.S. would remain the leading importer of oil.

The president asserts that the "nation that leads the world in creating new sources of clean energy will be the nation that leads the 21st century global economy." What is the basis for that assertion? If Sweden created a new source of clean energy -- suppose Swedish physicists perfected cold fusion -- then would Sweden's economy overtake China's? Or would China, taking advantage of cold fusion, simply race that much further ahead?

And while we seek new forms of fuel to power our homes and cars and businesses, we will rely on the same ingenuity -- the same American spirit -- that has always been a part of our American story.

This will not be easy, and there are no silver bullets. It will take a variety of energy sources, pursued through a variety of policies, to drastically reduce our dependence on oil and fossil fuels. As I've often said, in the short-term, as we transition to renewable energy, we can and should increase our domestic production of oil and natural gas. We also need to find safer ways to use nuclear power and store nuclear waste.

But in February, Obama's Interior Department blocked or delayed plans made by the Bush administration to open up parts of the outer continental shelf to offshore drilling for oil and natural gas. It also blocked drilling planned for public lands in Utah. And the president supports higher taxes on domestic oil production that are likely to slow production at home and make it more profitable to shift production -- and jobs -- overseas.

So far, Obama has mainly paid lip service to expanding nuclear energy. His one clear policy decision -- killing the proposed Yucca Mountain nuclear waste facility in Nevada -- will probably make it more difficult to boost nuclear energy as a source for generating electricity. It's also worth noting that the president mentioned nuclear energy only once in his speech, and then mainly in terms of making it "safer," as if it were inherently less safe than other means of producing electricity.

But the bulk of our efforts must focus on unleashing a new, clean energy economy that will begin to reduce our dependence on foreign oil, cut our carbon pollution by about 80 percent by 2050, and create millions of new jobs right here in America.

(The president neglects to mention how many jobs will be destroyed by higher energy costs in general and by severe declines in the production of coal and gas, which are certain if carbon pollution is to be reduced so dramatically. No one knows if there will be a net gain or loss in American jobs.)

My administration has already taken unprecedented action toward this goal.

This work begins with the simplest, fastest, most effective way we have to make our economy cleaner, and that is to make our economy more energy efficient. California has shown it can be done; while electricity consumption grew 50 percent in this country over the last three decades, in California, it remained flat.

Through the American Recovery and Reinvestment Act, we have begun to modernize 75 percent of all federal building space, which has the potential to reduce long-term energy costs by billions of dollars on behalf of taxpayers. We are providing grants to states to help weatherize hundreds of thousands of homes, which will save the families that benefit about $350 each year. That's like a $350 tax cut.

Consumers are also eligible as part of the Recovery Act for up to $1,500 in tax credits to purchase more efficient cooling and heating systems, insulation, and windows in order to reduce their energy bills.

(It's not clear whether the administration has taken into account the conservation rebound effect, which is the tendency for people to adjust their behavior in light of changing circumstances.

The most salient case concerns fuel economy: As vehicle gasoline mileage increases, people drive more, thereby offsetting the environmental and economic gains they otherwise would enjoy from lower fuel consumption per mile.

If the government subsidizes home weatherization, one result might be that, rather than pocketing the money, families will turn their thermostats up during the winter and down during the summer to enjoy more comfort for the same price.)

And I've issued a memorandum to the Department of Energy to implement more aggressive efficiency standards for common household appliances, like dishwashers and refrigerators. Through this step, over the next three decades, we'll save twice the amount of energy produced by all the coal-fired power plants in America in any given year.

We are already seeing reports from across the country of how this is beginning to create jobs, as local governments and businesses rush to hire folks to do the work of building and installing these energy efficient products.

And these steps wills spur job creation and innovation as more Americans make purchases that place a premium on reducing energy consumption. Businesses across the country will join the competition, developing new products and seeking new customers.

(Not necessarily. There is no way to predict whether economic investments in energy efficiency and clean energy will produce more jobs and innovation than investments in other economic sectors that would have been made, but will not be, because of the energy investments. They might, or they might not. But there is no way to tell.)

In the end, the sum total of choices made by consumers and companies in response to our recovery plan will mean less pollution in our air and water, reduced costs for families and businesses, and lower reliance on fossil fuels which disrupt our environment and endanger our children's future.

Energy efficiency, however, can only take us part way. Even as we are conserving energy, we need to change the way we produce energy.

Today, America produces less than 3 percent of our electricity through renewable sources like wind and solar. Meanwhile, Denmark produces almost 20 percent of their electricity through wind.

(Denmark has only 5.5 million people and its area totals only about 16,600 square miles; by contrast, Virginia has 7.8 million people and 43,000 square miles. Denmark's reliance on wind or whatever is not so remarkable when placed in context. And, as noted above, "America produces less than 3 percent of our electricity through renewable sources . . . " -- so doubling that capacity will generate only 6 percent of the country's electricity in 10 years, assuming demand remains flat.)

We pioneered solar technology, but we've fallen behind countries like Germany and Japan in generating it.

I don't accept that this is the way it has to be. When it comes to renewable energy, I don't think we have to be followers; I think it's time for us to lead.

We are now poised to do exactly that. According to some estimates, last year, 40 percent of all new generating capacity in our country came from wind. In Iowa, you know what this means. This state is second only to Texas in installed wind capacity, which more than doubled last year alone. The result? Once shuttered factories are whirring back to life . . .

In 2000, energy technology represented just one half of 1 percent of all venture capital investments. Today, it's more than 10 percent.

The recovery plan seeks to build on this progress, and encourage even faster growth. We are providing incentives to double our nation's capacity to generate renewable energy over the next few years -- extending the production tax credit, providing loan guarantees, and offering grants to spur investment in new sources of renewable fuel and electricity.

My budget also invests $15 billion each year for 10 years to develop clean energy including wind power, solar power, geothermal energy, and clean coal technology.

And today I am announcing that my administration is taking another historic step. Through the Department of Interior, we are establishing a program to authorize -- for the first time -- the leasing of federal waters for projects to generate electricity from wind as well as from ocean currents and other renewable sources. This will open the door to major investments in offshore clean energy . . .

It is estimated that if we fully pursue our potential for wind energy on land and offshore, wind can generate as much as 20 percent of our electricity by 2030, creating as many as 250,000 jobs in the process. As with so many clean energy investments, it's win-win: good for environment and great for our economy . . .

(Other estimates suggest renewable sources of energy, no matter how much they are pursued, will fall woefully short of future energy demand, at least globally. MIT professor Daniel Nocera, relying on population growth estimates and figures from the UN World Energy Assessment, predicts that even with heroic energy conservation measures, global energy demand in 2050 will be at least 28 terawatts -- that is 28 trillion watts. Without heroic conservation, the figure could be more than 100 terawatts. Current consumption is about 14 terawatts.

If every site on the planet with class 3 winds or greater were populated with windmills, the result would produce, Nocera says, 2.1 terawatts. If every river on Earth were dammed, hydroelectric power could produce 2 terawatts.

In fact, if the world built one new nuclear plant every two days for the next 45 years, the power generated annually would amount to 8 terawatts. The only realistic alternatives to closing the power gap are (a) fossil fuels or (b) solar power -- and daunting technical obstacles to the latter still remain.)

Right now, two of America's iconic automakers are considering their future and facing difficult challenges. But one thing we know is that for automakers to succeed in the future, these companies need to build the cars of the future. Yet, for decades, fuel economy -- and fuel economy standards -- have stagnated, leaving American consumers vulnerable to the ebb and flow of gas prices, and leaving the American economy ever more dependent on the supply of foreign oil.

(False. In December, 2007, President Bush signed into law new Corporate Average Fuel Economy (CAFE) standards requiring auto makers to raise gasoline mileage to an average of 35 mpg by 2020.)

We must create the incentives for companies to develop the next generation of clean energy vehicles -- and for Americans to drive them. That is why my administration has begun to put in place higher fuel economy standards for the first time since the mid-1980s -- so our cars will get better mileage, saving drivers money and spurring companies to develop more innovative products . . .

My budget also makes unprecedented investments in mass transit, high-speed rail, and in our highway system to reduce the congestion that wastes money, time, and energy. And it invests in advanced biofuels and ethanol, which, as I've said, is an important transitional fuel to help us end our dependence on foreign oil while moving toward clean, homegrown sources of energy.

(The president has not, however, shown much interest in lifting a 51-cent-per gallon tariff on Brazilian sugar-cane-based ethanol, denying U.S. consumers access to an affordable biofuel whose production does not drain American aquifers, pollute American rivers with agricultural runoff, or send world food prices shooting higher.)

And while we are creating the incentives for companies to develop these technologies -- we are also creating incentives for consumers to adopt these technologies. The Recovery Act includes a new tax credit of up to $7,500 to encourage Americans to buy more fuel-efficient cars and trucks . . .

My administration will be pursuing comprehensive legislation to move toward energy independence and prevent the worst consequences of climate change -- while creating the incentives to make clean energy the profitable kind of energy in America.

(Why energy independence? The U.S. does not pursue "independence" in any other economic sector. It imports food and clothing. It coordinates banking policy with other major nations. It embraces technological innovations from overseas. Why should it strive for autarky in energy, and only energy?)

The fact is, we place limits on pollutants like sulfur dioxide, nitrogen dioxide, and other harmful emissions. But we haven't placed any limits on carbon dioxide and other greenhouse gases. This is called the carbon loophole.

Last week, in response to the U.S. Supreme Court, the EPA determined that carbon dioxide and other tailpipe emissions are harmful to the health and wellbeing of our people. There is no question that we have to regulate carbon pollution; the only question is how we do so.

I believe the best approach is through legislation that places a market-based cap on these kinds of emissions . . .

Here's how a market-based cap would work:

We would set a cap on all of the carbon dioxide and other greenhouse gases that our economy is allowed to produce in total, combining the emissions from cars and trucks, coal-fired power plants, energy-intensive industries, and other sources.

By setting a cap, carbon pollution would become like a commodity. It would have a value as a limited resource. To determine that value, much like any other traded commodity, we'd create a market where companies could buy and sell the right to produce a certain amount. In this way, a company can determine for itself whether it makes sense to spend the money to become cleaner or more efficient, or to spend the money on a certain amount of allowable pollution.

Over time, as the cap on greenhouse gases is lowered, the commodity would become scarcer -- and the price would go up. Year by year, companies and consumers would have greater incentive to invest in clean energy and energy efficiency, as the price of the status quo became more expensive.

(This, put more simply, almost inevitably means higher prices for gasoline, heating oil, and electricity for all businesses and consumers.)

By closing the carbon loophole through this kind of market-based cap, we can address in a systematic way all the facets of the energy crisis: lowering our dependence on foreign oil, reducing our use of fossil fuels, and promoting new industries right here in America . . . .

The American people are ready to be part of this mission. For example, if each of us replaced just one ordinary incandescent light bulb with one compact fluorescent, that could save enough energy to light 3 million homes. And that's just one small step.

Finally, this is a global problem, and it will require a global coalition to solve it. Our climate knows no boundaries; the decisions of any nation will affect every nation . . . .

It is true that the United States has been slow to participate in this kind of a process. But those days are now over. We are ready to engage -- and we are asking other nations to join us in tackling this challenge together, including those nations that have not been quick to act.

All of the steps we have taken in just these first three months represent perhaps more progress than we have achieved in three decades. We are beginning the difficult work of reducing our dependence on foreign oil. We are beginning to break the bonds of fossil fuels. We are beginning to create a new, clean energy economy -- and the millions of jobs that will flow from it . . .

Will it be easy? Of course not. There will be bumps along the road. There will be costs for our nation -- and for each of us as individuals. There is no perfect answer to our energy needs -- and all of us will have to use energy more wisely. But I know that we are ready and able to meet these challenges. All of us are the beneficiaries of a daring and innovative past. I am confident that we can be -- that we will be -- the benefactors of a brighter future.