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The Status Report: Obama and Energy Security

One year ago, Brookings experts wrote a series of  12 memos to the incoming president on the most pressing policy issues facing the country. Now they assess the administration’s progress on those issues in The Status Report , a daily series of commentary with video to be featured in POLITICO's Arena . William Antholis and Charles Ebinger give President Obama a composite score of B+ on taking mostly positive steps internationally, but some missteps domestically, toward building a secure energy future for the United States.

International global energy diplomacy built on domestic action: A
William Antholis, Senior Fellow, Governance Studies; Managing Director, Brookings

President Obama and his team deserve an “A” for their engagement at Copenhagen. He moved away from the cumbersome UN treaty protocol process, and in the direction of a General Agreement to Reduce Emissions. Yet he did not fully establish this general agreement, pending final legislative action in the U.S. Congress – but I see that as an accomplishment. He avoided the short-term, feel-good agreement that would have lessened his chance of success at home. Moreover, he also began to organize international diplomacy around a new “E-8” – the eight most important emitters in the world.

Let me take each of these in turn. In the memo to the president I co-authored with Charles Ebinger last fall, we argued that “once domestic legislation is passed – but not before then – you will be in a position to negotiate a General Agreement to Reduce Emissions.” In the absence of domestic legislation putting a price on carbon, the Administration stuck to a game plan for how to reorient the climate negotiations. It was determined to legislate first, negotiate second. The great lesson of Kyoto is that on complicated global agreements requiring major domestic legislation, key countries should not seek a binding agreement until a number of them had first acted at home. The United States should explore a more bottom-up form of targets and trading, in which countries attracted by the cost-saving benefits of emissions trading could pass their own domestic cap-and-trade legislation and then agree to link their systems. That includes not just the U.S., but also big emerging countries such as China and India which still lack domestic institutions necessary to monitor emissions.

We also argued that the U.S. should negotiate a “general agreement”, not a binding treaty. The Copenhagen Accord could go down in history as the place where that General Agreement was first outlined – awaiting domestic legislation. Like the General Agreement on Tariffs and Trade – aka, the GATT – nations will come to see short-term limitations on their freedom as consistent both with their sovereignty and their long-term national interests. They will gain confidence in other nations’ willingness to comply. We need that same multi-decade experience on climate.

We argued that the administration should embrace what the UN can do, acknowledge what it cannot do. The UN is a good place to debate different interests and views of legitimacy. Small island nations used the Copenhagen meeting to draw attention rising sea levels. Oddly enough, though, oil-exporting states such as Venezuela and Saudi Arabia also made a moral argument in Copenhagen: they sought compensation for lost revenue in a carbon constrained world. Unfortunately, the climate – and our children and grandchildren – cannot wait for the perfect moral solution. The UN is not the best venue to negotiate an effective global treaty, or even a general agreement. The good news is that other options are available. 

We called for the creation of an E-8. The key countries on climate change are Brazil, China, the European Union, India, Japan, Russia, South Africa, and the United States: the countries that ended up negotiating the Copenhagen Accord. Those eight actors currently account for more than half the world’s population, and 70 percent of global emissions. While an E-8 does not have the full moral weight of the entire 192-nation UN, it is small enough to get things done.

Guided by a sense of what was achievable in the U.S. Senate – of which Mr. Obama was recently a member – the president may have just laid the foundation for a lasting and realistic international institution. That is a considerable accomplishment.

Slash Oil Dependence and Create a Green Economy: B-
Charles Ebinger, Senior Fellow and Director, Energy Security Initiative

The first action taken by President Obama was to make significant investments in the new “green” economy through the American Recovery and Reinvestment Act, which provided billions of dollars for energy efficiency, renewable energy, electricity and transportation infrastructure improvements (such as the smart grid and rail) and technological development. Noteworthy provisions include $400 million for an Advanced Research Projects Agency-Energy (ARPA-E) for energy R&D and $2.7 billion for Energy Efficiency and Conservation Block grants to state and local governments for projects that reduce fossil fuel use—retrofitting buildings and promoting energy efficiency standards for new buildings, for instance.

Obama went further when he had the EPA and the Department of Transportation jointly propose a new rule that will reduce emissions for the automobile fleet for model years 2012-16.  The program will increase fuel economy by approximately 5 percent every year and will impose, for the first time, national greenhouse gas emissions standards so that the automakers no longer have to worry about a patchwork of different state regulations. 

While these are dramatic accomplishments, the administration continues to be ill served by some high level energy and environmental officials who continue to argue that we do can meet our energy future by near total reliance on wind, solar and geothermal. Officials in this camp are best personified by the new FERC chairman, who in April 2009 indicated that the United States may never have to build another coal or nuclear power plant to meet our electricity needs. While the chairman’s goal of a green energy future might someday be feasible, it would require the creation of an entirely new national electricity grid at an estimated cost of $150 - $300 billion.  To date, the administration has been supportive of smart grid pilot projects at the distribution level, but has done little to convince the American people of the need to rebuild the nation’s energy infrastructure.

Similarly, the Treasury Department’s release of its “Green Book” that highlights proposed tax policies for the domestic oil and gas industry shows a profound ignorance of our petroleum industry. The proposals call for the elimination or reduction of most tax credits for domestic producers, arguing that the revenue saved can be redirected to the renewable energy industry.

While proponents of renewable energy (of which I am an advocate) argue that over time we will move to plug-in vehicles and electric cars, the chance of any type of electric vehicle accounting for more than 20 percent of the vehicle fleet by 2030 will require a prodigious effort, meaning that for the foreseeable future the world will remain dependent on oil. The fact that only a relatively small proportion of our oil comes from the Middle East will do nothing to insulate us from any global crisis that will send the prices skyrocketing. If the Obama administration is really serious about our petroleum dependency and the contribution that diesel fuel and gasoline contribute to climate change and other air pollution, then the president would do what John Anderson had the courage to do in the 1980 presidential campaign and call for a large gasoline tax increase that could be used to reduce the deficit.

While proponents of “cap and trade” (I support a carbon tax) argue that setting a price on carbon will move us to a renewable energy future, the Waxman-Markey House bill is filled with so much pork and loopholes for select industries (including coal) that it deserves to die a quick death. The Senate’s Kerry-Boxer bill at least offers some balanced policies toward the petroleum and nuclear energy industries.

Finally, numerous administration officials and the president himself have shown a shifting view to nuclear energy both during the campaign—when it was anathema to the people currently sitting in the white House and the EPA—to now when it is “part of the fuel mix.” Indeed, what signals are being sent when the long-term solution to nuclear waste storage at Yucca Mountain is shelved by both the president and the Senate majority leader? At the same time there is disarray in the president’s own party with Senator Feinstein of California now blocking the development of one of the largest solar plants in the nation by designating large swaths of the Mojave desert a national monument.