Obama muses on the connection between energy/climate and our other problems
Obama sat down for a long and fascinating interview with Time‘s Joe Klein yesterday. It’s well worth reading the whole thing, but in particular there’s juicy stuff on energy and climate.
The biggest problem with our energy policy has been to lurch from crisis to trance. And what we need is a sustained, serious effort.
Could that be more right?
… just from a purely economic perspective, finding the new driver of our economy is going to be critical. There is no better potential driver that pervades all aspects of our economy than a new energy economy.
I don’t think you can get righter than that without reaching Absolute Right, which physicists agree is impossible.
… we are just going to completely revamp how we use energy in a way that deals with climate change, deals with national security and drives our economy — that’s going to be my number one priority when I get into office, assuming, obviously, that we have done enough to just stabilize the immediate economic situation.
I’m less enthusiastic about this:
The only way to do it effectively is if you are building effective consumer rebates into the plan. The bulk, the lion’s share of any revenue generated from cap-and-trade has to go right back to the consumer.
There’s a certain level of direct rebates to consumers that is desirable. Well above that, there’s the minimum level required to make a program politically viable (after all this will be the way to bribe voters to support it). I think even that level falls short of the “bulk,” or the “lion’s share.” I bet you could sell it using maybe 20 percent of the revenue for direct payments. Most of the revenue is better spent directly rewarding emission reductions.
Regardless, it’s nice to see a presidential aspirant with thoughts about policy beyond what’s in their stump speech soundbites. Here’s the whole energy excerpt:
The biggest problem with our energy policy has been to lurch from crisis to trance. And what we need is a sustained, serious effort. Now, I actually think the biggest opportunity right now is not just gas prices at the pump but the fact that the engine for economic growth for the last 20 years is not going to be there for the next 20, and that was consumer spending. I mean, basically, we turbo-charged this economy based on cheap credit. Whatever else we think is going to happen over the next certainly 5 years, one thing we know, the days of easy credit are going to be over because there is just too much deleveraging taking place, too much debt both at the government level, corporate level and consumer level. And what that means is that just from a purely economic perspective, finding the new driver of our economy is going to be critical. There is no better potential driver that pervades all aspects of our economy than a new energy economy.
I was just reading an article in the New York Times by Michael Pollen about food and the fact that our entire agricultural system is built on cheap oil. As a consequence, our agriculture sector actually is contributing more greenhouse gases than our transportation sector. And in the mean time, it’s creating monocultures that are vulnerable to national security threats, are now vulnerable to sky-high food prices or crashes in food prices, huge swings in commodity prices, and are partly responsible for the explosion in our healthcare costs because they’re contributing to type 2 diabetes, stroke and heart disease, obesity, all the things that are driving our huge explosion in healthcare costs. That’s just one sector of the economy. You think about the same thing is true on transportation. The same thing is true on how we construct our buildings. The same is true across the board.
For us to say we are just going to completely revamp how we use energy in a way that deals with climate change, deals with national security and drives our economy, that’s going to be my number one priority when I get into office, assuming, obviously, that we have done enough to just stabilize the immediate economic situation. In conversations with folks like Warren Buffet, Larry Summers, and the other people that I’ve been spending time with on this, I described it as we’ve got a boat with a lot of leaks and we need to get it into port. That’s what the financial rescue package is about. But once we get it into port, once the credit markets are functioning effectively, then it’s time for us to go back to the fundamentals of this economy.
Now, the one other point I want to make about this, though: we can’t divorce the energy issue from what I believe has to be the dominant political theme underlying everything — the economy, healthcare, you name it. And that is restoring a sense that we’re growing the economy from the bottom up and not the top down. That’s the overarching philosophical change that we’ve got to have. It’s the attitude that Henry Ford had when he paid his workers a decent wage. That means they’re going to be able to buy their cars.
The irony of McCain trying to make this whole Joe the Plumber thing as his sort of mantra over the last few days, if you look at the transcript of my conversation with him, the point I was making was two-fold. Number one, I want to give you a tax cut sooner so you can save sooner to start your business sooner because the average plumber starting off sure isn’t making $250,000 a year.
[Q] Neither is Joe.
[BO] Of course. And the second thing is plumbers, like everybody else, you need customers. And if everybody’s broke, you’re not going to be able to build your business. That’s why I tell that little pie story in speeches. It’s a simple principle that we’ve lost, which is when everybody’s sharing in our prosperity, everybody wins. The entire economy grows. Fighting for the middle class, whether it’s on tax cuts, on healthcare, on college affordability, those are things not designed to simply penalize rich people, those are designed to create this broad middle class that creates our rich people. That’s what I’m going to be fighting for.
[Q] Last question is, the logic seems to me, on the environmental side, that you’re going to have to slow walk cap-and-trade, you’re going to have to slow walk because that would naturally raise prices. Electricity prices, as you said in the past — the series of priorities —
[BO] The only way to do it effectively is if you are building effective consumer rebates into the plan. The bulk, the lion’s share of any revenue generated from cap-and-trade has to go right back to the consumer.
[Q] So the payroll tax swap?
[BO] The payroll tax swap is one way of doing it. Just sending a pure energy rebate to folks is another way of doing it. We’ve got to figure out a simple way to do it but the point is, is that we’ve got to cushion consumers from those price hikes and then allow technology to catch up in such a way that whatever retrofitting has to be done pays for itself.
I mean, essentially what we should be doing is setting the rules, setting the incentives, pricing pollution accurately, and then letting technology catch up the same way it did with acid rain. And the one thing that we probably will have to do, and this is where the federal government expenditure side comes in, we’ve got to pump a lot of separate players to make the initial investment.
We went to this company in Seattle, McKinstry, great little company. Not so little anymore. It started off as a mom-and-pop plumbing and HVAC operation. Somebody at some point in the family figured out, you know what, we could really just specialize in making businesses more energy-efficient. They ended up working this niche. They now have several thousand employees. They’ve got welders on-site who are making $80-90,000 union wages with full benefits. They’ve got engineers, all computerized designing, completely remaking school buildings, hospitals, etc. This has been voted like one of the best companies to work for in Seattle. They’ve got a full-court basketball and weight room where everybody goes out during lunch and plays. Great cafeteria.
I mean, it’s an ideal model, but here’s the point. I asked them, I said, what are your average customers saving. And their customers are saving 20-30% on their energy bills, so they’re recouping their cost potentially in 5 years time — but in the current economic environment, a lot of great potential customers of McKinstry aren’t going to do it unless they get some strong incentives from the federal government.
That’s where the federal government comes in. We’ve got to do [inaudible] but we’ve also got to help folks who knows this is the right thing to do, do it. It’s the same thing with — there are tons of people right now who want to buy hybrids. There’s a huge market for it. But good luck getting a car loan to trade in your SUV for a hybrid. We’ve got to give some folks some incentive so they can start making the right decisions.