Of all the problems the new Obama administration faces–health care, national security, the economy, global warming–none is more pressing than energy.
No sooner than the 270th electoral vote was confirmed, bloggers and reporters started to wonder aloud about President-elect Barack Obama’s energy plan. In his campaign, the talking point boiled down to $150 billion dollars of investment and five million new jobs. More recently, he outlined an immediate economic recovery plan that will create 2.5 million new jobs by 2011, in part by “building wind farms and solar panels, fuel-efficient cars and the alternative energy technology that can free us from our dependence on foreign oil and keep our economy competitive in the years head.”
The challenge we face with energy, however, is unprecedented. It’s bigger than fascism, communism, and putting a man on the moon. It’s entirely global in scope, and our survival as a civilization depends on it. Nevertheless, there are powerful interests working against it…and us.
Energy is the world’s largest single industry. It just so happens that it’s controlled by so many dictators and multinational corporations, and the incentive structure is such that they are compelled to maximize short-term gains at the expense of long-term prosperity and well being, both for themselves and their six billion stakeholders. First of all, the rules governing energy economics must profoundly change. It’s a tall order. And the American government, backed by its multi-trillion-dollar economy, is the only entity big enough to pull it off. Obama knows this.
A recent Newsweek special issue on the Secrets of the 2008 Campaign featured a superb quote, in which Obama echoes our critique that greenies tend to be penny wise and pound foolish. When he was preparing for a televised debate during the Democratic primaries, Obama was recorded saying:
“I don’t consider this to be a good format for me, which makes me more cautious. I often find myself trapped by the questions and thinking to myself, ‘You know, this is a stupid question, but let me … answer it.’ So when Brian Williams is asking me about what’s a personal thing that you’ve done [that's green], and I say, you know, ‘Well, I planted a bunch of trees.’ And he says, ‘I’m talking about personal.’ What I’m thinking in my head is, ‘Well, the truth is, Brian, we can’t solve global warming because I fucking changed light bulbs in my house. It’s because of something collective’.”
Ayn Rand’s hero, John Galt, was not concerned with the minutiae of incremental advancement and neither is Obama. Does he think we all need to keep our tires properly inflated to conserve fuel? Of course he does. But this is just basic first aid: stop the bleeding and stabilize the patient. The cure requires a blood transfusion and several organ transplants. It calls for innovation on par with what Galt had in mind when he designed a motor that runs on infinitely clean, renewable, and abundant static electricity. It calls for a revolution, and revolutions start with the people.
We were fortunate enough to have met Senator Obama early in the primary campaign, when he stopped by Conserv Fuel in Brentwood, CA, to make a speech on energy. Max Gladwell founder, Rob Reed, was one of the “green pioneers” who launched LA’s first B99/E85 filling station. Obama was speaking there in June of 2007, about the bottom-up solutions that Conserv and its entrepreneurial founders represented. (He was also 20 points behind Clinton.) Obama carefully tempered his support of ethanol by qualifying “certain types” in reference to cellulosic versus corn. Obama had a command of the energy issues then, and now he’s conferring with the best and brightest minds on this most pressing and challenging issue. The vision and execution for this new energy plan could be vested with America’s first Chief Technology Officer (CTO).
At the recent Web 2.0 Expo, John Doerr of Kleiner Perkins, who considers cleantech the greatest economic opportunity of the 21st century, said the top three things this new CTO should focus on are energy, green technology, and “more basic research. The most important thing,” Doerr said, that Obama needs to do is, “kick-start a huge amount of innovation and research in energy. We invest less than a billion dollars a year in energy, compared to $32 billion in health care.” About energy, he said, “It’s the challenge for our generation. It’s the scourge of the economy.”
The Oil Problem
During the great oil shock of 2008, which now feels like ancient history, we wrote frequently about high energy prices and what it meant for the environment, our security, and the economy. This amounted to a double-edged sword. The #1 reason why high gas prices [were] good for America and the world (despite being bad) was that conservation would ultimately drive those prices down. And this would be a good thing for one reason: an opportunity to seize control of our energy destiny.
If and when prices come down, it will be up to the U.S. government to support them in an effort to (a) continue to reduce demand, (b) price in the external costs of GHG emissions, toxic emissions, and other externalities through taxes and other market mechanisms, and (c) reinvest that tax revenue in a the pursuit of a more sustainable green economy.
Prices have come down and then some. According to CNN, “It took gas prices more than three years to rise from $2 to a record high of $4.11, but just four months to plummet all the way back again – and then some. For the first time since March 9, 2005, the average price of gasoline fell below $2 a gallon, according to a report from motorist group AAA.”
While it would not be wise to levy a tax on gasoline during the economic crisis and recession, the Obama administration should have a plan in place to do so as soon as the economy shows signs of recovering. It may not be politically expedient, but we’re going to pay this tax one way or another. This past summer, we paid it to Putin, Chavez, and the Saudis. Best to keep that revenue at home. There are ways to mitigate the impact it would have on lower-income families by reducing their payroll taxes. This incentivizes them to both work more (be more productive) and drive more efficiently (be less wasteful). Any short-term pain from a hefty gas tax would be more than offset by the long-term gains we’d realize through a competitive market for clean alternatives, complete with the jobs and economic boost it would generate, not to mention the security that comes with reducing our dependence on foreign oil.
Obama often included nuclear energy and so-called “clean coal” in his speeches. We sincerely hope he was serious about the former but pandering for votes with the latter.
In his infamous and mischaracterized quote about bankrupting coal-fired power plants, Obama described a scenario where cap-and-trade policies would make it difficult to operate a typical coal-fired power plant at a profit. Though we all heard Obama endorse “clean coal technology”, we think it comes with a wink and a nudge, because we all know it amounts to silly talk. Obama’s point about coal-fired power plants going bankrupt is this: when policies price in the costs of pollution, such as through cap and trade, these plants will no longer be economically viable. That is, until the coal industry actually innovates and develops legitimate “clean coal”. At the very least, this means capturing and sequestering all of the CO2 emissoins, which has yet to be tested or proven on any serious scale. Until then, it’s nothing more than Orwellian double speak.
Nuclear power, on the other hand, holds tremendous promise given an economic environment that taxes or otherwise caps CO2 emissions. Save for some unforseen breakthrough in energy science, our low-carbon energy future will include a fair share of nuclear power. Having surrounded himself with very smart people, Obama also knows this.
For those who follow us on Twitter, you’ve seen our Einstein background with our favorite quote of his: “We cannot solve our problems with the same thinking we used when we created them.” Einstein’s general theory of relativity–his theory of gravity–changed the world. It changed how we understand space and time. This is the level of thought and innovation that will be required if we’re to truly solve the energy problem. New thinking from a new generation of networked social entrepreneurs.