05 November 2008

Obama May Put Renewable-Energy Plan Ahead of Climate Package

By Daniel Whitten, Bloomberg.Com, November 4, 2008 23:03 EST

Nov. 5 (Bloomberg) -- President-elect Barack Obama may pursue legislation early next year to speed a transition to an economy fueled by renewable energy sources and delay a fight on climate change until the economy improves.

With unemployment at a five-year high, an early effort to create jobs by encouraging electricity production from solar and wind will get top priority, energy lobbyists and analysts said. A more far-reaching effort on a climate-change bill may be delayed until late next year or 2010.

"He will put forward an energy bill ahead of a climate bill,'' said Kateri Callahan, president of the Alliance to Save Energy, an energy advocacy group in Washington that represents 3M Co., Areva SA and Dow Chemical Co. "That bill will stimulate the economy toward development and use of energy efficiency and clean energy sources and technology.''

Obama's advisers won't say which initiative he will push first. He has proposed a $175 billion economic-stimulus package and plans to revamp the energy economy as part of a separate climate bill, campaign adviser Jason Furman said in an interview.

Obama calls the green-jobs and climate plan a ``mid- to long-term solution'' on his campaign Web site. He plans $150 billion in investment over 10 years to create 5 million jobs in the auto and clean-energy industries.

Oil Drilling

Obama may block oil and natural-gas drilling in new offshore areas. He said Aug. 1 he would compromise on offshore drilling if it was necessary to win approval for alternative- energy investments and more fuel-efficient cars.

"That was total lip service,'' said Kevin Book, an analyst at Friedman Billings Ramsey & Co. in Arlington, Virginia. "If Congress doesn't block drilling in its appropriations work in March, Obama is very likely to re-withdraw the areas that Bush put back in bounds.''

Jack Gerard, president of the American Petroleum Institute in Washington, said Obama's plan to impose a windfall-profits tax on oil companies would harm one of the few industries that are thriving.

"We certainly hope public officials wouldn't look at this and say, `Gee, let's see what damage we can do to the one bright spot,''' Gerard told reporters Oct. 20 at an industry meeting in Scottsdale, Arizona.

Funding for Obama's windfall-profits tax may have dried up. The plan is to impose the tax when crude prices exceed $80 a barrel. Obama campaign adviser Jason Furman said Oct. 22 that he's now assuming zero revenue from that tax because oil tumbled from a record above $147 a barrel in July to less than $70 last month.

Fuel-Efficient Cars

Obama wants the ailing auto sector to make plug-in hybrid cars and more models that run on ethanol. He proposes a tougher fuel-economy mandate. He plans $4 billion in tax help to retool factories to make advanced cars on top of $25 billion in loans that have been enacted for that purpose. Consumers would get a $7,000 tax credit for purchases of advanced cars.

Obama has "found a formula that he's been pitching to the American people that I think would get a lot of traction in Congress, which is to get unemployed manual labor allocated to installing solar panels,'' said Friedman Billings analyst Book.

The transition to a low-carbon economy will yield many opportunities to create jobs, said Senator Jeff Bingaman, a New Mexico Democrat who chairs the Senate energy committee.

Bingaman said in an interview he didn't know the order in which Obama would pursue his energy priorities. He said he would develop bipartisan energy legislation early next year and has advocated for longer tax credits for renewable energy and mandates for renewable electricity production, as Obama has.

2025 Goal

Renewables, including hydropower, account for 8 percent of U.S. electricity. Obama has said he wants 10 percent of electricity to come from renewable sources by 2012 and 25 percent by 2025.

A measure to expand use of green power and plug-in hybrid cars could ease the transition to a climate bill, Callahan said. A climate bill will be a "massive piece of legislation with such far-reaching impacts'' and Obama understands the "need to take some time with it,'' Callahan said.

As proposed, Obama's climate plan would cut emissions of so-called greenhouse gases linked to global warming by 80 percent by 2050. Emissions credits would be sold in an auction under a cap-and-trade program, not doled out to utilities and others for free. Companies that exceed caps must buy credits on top of those obtained at auction, in Obama's cap-and-trade plan.

"Barack Obama could well put off a costly and regressive surcharge until later in 2009 or 2010, leaving Congress to shoulder the burden,'' Book said. "On the day that he is elected, cap and trade will fall to No. 10 on his list of top 10 priorities and won't come back until the economy does.''

Higher Costs

Power from renewable energy and cleaner coal-fueled plants is more costly than current U.S. generation sources, said Michael Morris, chief executive officer at American Electric Power Corp., the nation's biggest producer of electricity from coal.

"I do think there are a few things there that a president Obama doesn't have right,'' Morris said in a telephone interview. He objected to Obama's plan to auction all credits and said any climate plan must incorporate a stronger commitment to nuclear power than the president-elect elect has made.

Morris gave Obama high marks for pushing the creation of jobs through expansion of the renewable energy industry, pointing to the proposal to string high-voltage lines to population centers like Chicago from areas high in wind-power potential like the Dakotas.

"He's a big believer in green energy and the jobs that might be created by alternate energy forms, wind and solar,'' Morris said. "We think that's a good thing.''

To contact the reporter on this story: Daniel Whitten in Washington at dwhitten2@bloomberg.net


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