How U.S. Candidates Differ on Energy Policy

10/28/2008 by Erica Gies
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SAN FRANCISCO — High energy prices and growing awareness of climate change have made energy policy a major issue in the U.S. presidential election, closely tied to voters’ main concern: the staggering economy.

The platform of the Republican nominee, Senator John McCain, leans toward traditional energy supplies and market-based solutions, while the plan of the Democratic nominee, Senator Barack Obama, would change course on energy sourcing and require greater government participation.

The League of Conservation Voters, an environmental advocacy group that rates politicians based on their votes, is backing Obama because he has voted in line with its interests 86 percent of the time, versus 24 percent for McCain.

“Barack Obama has put out a plan that is visionary,” said Tim Greeff, the league’s deputy legislative director, referring to Obama’s energy proposals.

Obama’s proposed overhaul of the energy sector would generate economic growth and new jobs, he said, a particularly potent message to voters reeling from rising unemployment, record home foreclosures and banking failures. Part of Obama’s $150 billion, 10-year plan would support modernizing manufacturing centers and retraining the manufacturing workforce to do five million greener jobs, from building and installing new energy technology to weatherizing existing buildings.

Obama would finance these programs by auctioning off 100 percent of pollution credits under a new a cap and trade program. McCain also favors such a program but would give away credits at first. Critics of McCain’s proposal say that it would reward polluters and delay greenhouse gas reductions, while supporters say his approach is economically realistic.

The McCain plan offers deferments for economic efficiency and duress. David Owens, executive vice president of the Edison Electric Institute, an international trade association for privately owned electric utility companies, calls the approach pragmatic.

“You’re not really weakening your ultimate goal because what you’re trying to do is balance the impact on the economy as well as the goal of reducing greenhouse gases,” Owens said.

Environmentalists say that the effect of the deferments would be to slow the reduction of greenhouse gases, undercutting any reduction target. But their far deeper concern is focused on a mechanism that has been called a safety valve, escape hatch, or price cap. It would allow polluters to buy potentially unlimited allowances if the price of carbon credits rose to a pre-determined level.

The idea of a safety valve mechanism is politically popular in Washington and could be added into either of the candidates’ plans, although neither mentions it, said Severin Borenstein, director of the University of California Energy Institute.

Legislation saddled with a low-priced safety valve would not reduce emissions much, he said. Industry lobbyists, however, argue that a cap-and-trade program will not work without it.

Greeff, the conservationist, said that in general, McCain would reduce greenhouse gases while defending the economics of existing industry, while “Obama views this as an opportunity.”

By amassing capital from the permit auction, Obama can “drive money into innovation and renewable technology and domestic energy production very quickly,” Greeff said. “What would be a bigger economic stimulus for this country than fundamentally recreating and redesigning the way we produce energy?” he added.

Energy efficiency has long been recognized as the least costly and cleanest fastest way to reduce energy costs. Obama’s plan would seek a 15 percent reduction in energy demand by 2020. New buildings would be carbon neutral by 2030, and existing buildings’ efficiency would improve by 25 percent over the next decade.

Federal buildings would have more aggressive targets; and one million low-income homes would be weatherized annually. The income structure for utilities would be decoupled from volume sales to encourage efficiency rather than increase supply. An Obama administration would also invest in the electricity grid and in more sustainable communities and would require 10 percent of electricity to come from renewable sources by 2012.

McCain, too, would apply a higher efficiency standard to new federal buildings and to retrofitting existing federal buildings; but he has not set a target. He also wants to improve the grid and deploy “smart meters” to customers to help them to better understand and reduce their energy consumption.

McCain’s platform proposes the introduction of a permanent tax credit for companies investing in research and development, equal to 10 percent of their wage costs; and his plan would encourage the market for wind, hydro, and solar power by offering “even-handed” tax credits until renewable energy becomes competitive.

In practice, however, his voting record does not demonstrate support for renewable energy or energy efficiency, Greeff said. “It’s not enough anymore to just say you support renewable energy,” he added. McCain has not taken his “thumb off the scale for coal, gas and oil, and nuclear,” Greeff said., a nonpartisan fact-checking Web site, confirms McCain’s voting record against renewable energy.

While McCain has often said that he does not believe in subsidies, he does support “incentives” for nuclear energy: he would build 45 new plants by 2030 and as many as 100 ultimately. While some climate scientists and environmentalists support nuclear power because it has no operating emissions, it is heavily subsidized and expensive.

“The reason no nuclear plants have been built in the last 30 years in this country isn’t because of Three Mile Island,” Greeff said, referring to the U.S. nuclear accident in 1979. “It’s largely because no one can do it economically.”

Obama says that nuclear power will probably be necessary to meet aggressive emissions reduction goals; but before expanding the sector, he says, waste storage, security of materials, and proliferation must be addressed.

Amory Lovins, chairman and chief scientist of Rocky Mountain Institute, an organization that researches and promotes market-based energy solutions, said nuclear investment was not necessary to combat climate change.

“Just the opposite is true,” Lovins said. “Nuclear investment reduces and retards climate protection.” Supporting nuclear would reduce greenhouse gases “roughly 20 to 40 times slower than if you spent the same dollar buying efficiency and micropower,” he said.

In addition, building a 1,000 megawatt nuclear plant is energy intensive. It takes 10 to 15 years of operation just to recover the energy expended in construction, said Matt Simmons, chairman of Simmons and Company, an energy investment banking firm.

Simmons supports the U.S. pursuit of nuclear power, but he said 45 to 100 new plants was not a realistic target. Aside from the high economic and energy investment, other issues would slow progress, he said. Most U.S. nuclear engineers have retired since the industry’s stagnation began. And yellowcake uranium is also in short supply, so existing U.S. plants reprocess mine tailings and weapons-grade materials.

“If we tried to build 45 more plants, we’d have a tremendously tough time figuring out how to fuel them,” Simmons said.

Both candidates support “clean coal,” a term derided by environmentalists, and by Simmons, as an oxymoron. To further confuse the issue, clean coal can mean reducing emissions on existing plants or carbon capture and storage, known as CCS, a technology that separates carbon dioxide from the coal and injects it underground for long-term storage, but it is not yet commercially available.

Obama has been criticized by some in his own party who have suggested that his position may reflect the influence of the strong coal lobby in Illinois, his home state.

McCain and Obama, however, say that continuing use of coal is an unavoidable reality, particularly in the United States and China, both of which have vast reserves. Therefore, cleaning up coal should be a priority.

Owens, the utility association executive, agrees. “I cannot envision a scenario over the next 20 to 30 years where there will not be increased reliance on coal,” he said.

McCain wants to give $2 billion a year to research and development of carbon capture and storage. Obama wants the Energy Department to develop five commercial-scale CCS plants through public-private partnerships.

A recent report from management consulting firm McKinsey suggests that commercial CCS technology is more than 20 years away. Simmons said it could be done more rapidly, particularly if plenty of money is poured into research and development. But he called McCain’s proposal “a drop in the bucket.”

Both candidates support expanded oil drilling, although Obama couches it as a political compromise. Specifically, Obama would prioritize drilling in existing oil leases rather than new areas on the Outer Continental Shelf. PolitiFact, though, says there may not be as many unused leases available as Obama asserts.

In recent months, McCain has come out strongly in support of drilling on the shelf. His campaign has also espoused a general enthusiasm for drilling that has led to false claims, according to economic and energy experts, who dispute the assertion that drilling would quickly reduce gasoline prices and lead to American energy independence.

Proven oil reserves in the United States are just 1.8 percent of the world’s total, while Americans used 24 percent of world production in 2007, according to the Energy Information Administration.

Oil extracted by multinational companies in the United States, moreover, does not go to American consumers but rather into the world oil market.

“The idea that it’s our oil if we drill for it shows a complete misunderstanding of world oil markets,” said Borenstein, the energy institute director. The world market context also prompts him to dispute Obama’s position that speculation has driven up the price of oil.

Simmons is a longtime supporter of increased drilling; but he said searching for oil and dealing with likely lawsuits about specific drilling locations would be lengthy pursuits. Also, an acute shortage of offshore drilling rigs worldwide would retard progress. Bringing oil from new sources to market would very likely take 20 to 25 years, he said.

Recent Republican administrations have already demonstrated the fallacy of the drilling philosophy, said Greeff, the environmental advocate.

“Under the Bush administration, the amount of leases for new land to drill on has increased 361 percent,” he said. “The amount of drilling has doubled. And yet prices have gone up over 300 percent during his eight years in office.”