Presidential Candidates Have Divergent Views on Energy
Precluding the emergence of bipartisan fervor in our nation’s capital, there’s relatively little that the next president will be able to change in energy policy. That’s not to say that the candidates aren’t deeply divided on several issues, or that energy voters cannot make a meaningful decision between the two. Throughout this election, Romney rejected the heavy-handed use of government subsidies to support emerging energy sources; Obama used his last term to implement programs and regulations to fast-track our economy away from fossil fuels. Nevertheless, the next president will have to face down a divided Congress more disposed toward logjam than constructive policy negotiation.
The good news is that a substantial portion of our energy sector can continue humming along without a concerted legislative effort or a new national energy plan. Technological developments have greatly expanded domestic production capabilities. Oil production has increased every year of Obama’s presidency – despite declines offshore – and is expected to continue increasing through 2020. Natural gas output is similarly expected to grow over the next decade, paving the way for the U.S. to be a net exporter by 2022. Renewable Portfolio Standards and similar energy production goals in 38 states have generated a thriving market for renewable and alternative power and conservation efforts, helping bolster these emerging industries as they find ways to bring costs down and become more economically competitive. These trends are quite promising, and can largely be tied to state policies outside the jurisdiction of the slow-footed federal government.
The next president will surely have the largest impact over the future of American energy through the federal regulatory process. Undoubtedly, this is a big election for coal. While President Obama has touted a $5 Billion investment in “clean coal,” his EPA has mounted a substantial regulatory effort to make coal more expensive to produce, place constraints on its use, and complicate the storage of resulting coal ash. The promise of greenhouse gas regulations under the Clean Air Act will make it all but impossible to build new coal facilities in the future. Crashing natural gas prices have certainly played a role in the declining profile of coal, contributing just 42% of our electricity in 2011, but this onslaught of regulations is accelerating its demise. Governor Romney’s energy plan places a heavy emphasis on coal; his administration would surely take steps to roll back regulations where possible to improve the fuel’s prospects. Anticipating a Romney victory and potential scenarios for growth, Market Vectors Coal ETF has increased 8.5% over the last month.
The coming debate over the fiscal cliff may be a second significant opportunity the next president has to suggest his vision for the future of American energy. This is an ideal opportunity to put all fuels on an even footing in tax and incentive treatment, reduce uncertainty in the energy sector, improve competition, and produce significant savings (in 2010, we spent $40 billion on energy-specific support). Unfortunately, government spending programs can be intractable, particularly programs that support politically important constituencies. The energy preferences of these candidates will be particularly potent in deciding how far we can go in rolling back expenditures in the energy sector. Certainly, Romney has indicated far more willingness to strip away subsidies across all fuel types. President Obama has expressed his interest in continuing both the Production Tax Credit and Investment Tax Credit anticipated to cost nearly $14 Billion between 2012 and 2016.
I’m going to assume that some policies have a nearly certain outcome regardless of who takes the White House. First, Keystone XL will be approved – there’s no substantial argument against this critical pipeline. Second, economic cooperation among North American nations will increase oil & gas production. Taken together, these two eventualities will significantly alter the geopolitics of energy over the next two decades. Third, in the absence of bipartisan agreement, there will be no legislative effort to restrict the emission of greenhouse gases.
Tonight, Americans will decide between two candidates with significantly different visions for the future of the domestic energy industry. The winner is unlikely to change our energy landscape, but will hopefully be a wise steward of the regulatory juggernaut that can limit innovation, growth, and success.
This piece originally appeared on the National Journal Expert Blog.