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President Obama and Alternative Energy Policies
It will take several years to approve and fully implement comprehensive new alternative energy policies, however the Obama administration promises a new era of energy and environment policy for the United States. Obama expressed his intention to shift the U.S. away from petroleum as its primary energy source and towards alternative renewable energy sources, advanced biofuels and efficient, low greenhouse-gas-emitting technologies.
The key policy initiatives involve caps on emissions such as carbon dioxide and auctioning of greenhouse gas credits to motivate a fundamental shift from high emitting industries to low-carbon energy alternatives. Obama has stated that the policy would be broader than any other cap and trade system proposed or in place to date in the world.
In order to implement the policy, renewable energy, natural gas, plug-in hybrid vehicles and advanced electricity transmission are expected to receive substantial incentives. Obama has proposed drawing upon $150 billion from the emissions auction to finance low-carbon alternatives over the next several years.
Oil Companies, Windfall Profits Tax & Offshore Drilling
The process of reducing emissions would start by targeting the fossil fuel industry. Oil companies are concerned about policies such as windfall profits taxes. Oil industry proponents state that oil companies need to gain access to areas closer to the coastline. Obama has already altered his policy regarding offshore oil and gas drilling in the Outer Continental Shelf due to the recent spike in oil and gas prices.
However, Obama has stated that he disfavors extensive new domestic petroleum drilling. The Democratic-led Congress could reinstate portions of the moratorium on offshore drilling that expired in September 2008. To the extent that oil prices have dropped recently, there may be less political opposition to imposing new restrictions.
Renewable Energy Initiative
It is likely that greenhouse gas-climate change legislation will be introduced in the near term. A renewable energy initiative will be central to reduce human impact on global warming. The president elect has stated goals of reductions of 25% by 2025 and 10% reduction in the near term.
Renewable Portfolio Standards (RPS) are state policies requiring an individual state to generate a percent of its electricity from renewable sources. Each state has a choice of how to fulfill this mandate using a combination of renewable energy sources such as wind, solar, biomass, geothermal or other renewable sources. Some RPS specify the technology combination, whereas others permit the market to drive the choices. This is preferable because each state has different renewable resources. For instance, Arizona has substantial solar resources compared to many other states and North Dakota has greater wind resources than many other states.
Several wind turbine companies have sought a federal renewable portfolio standard. These wind turbine manufacturers and solar firms will benefit substantially under a renewable portfolio standard.
Democratic leaders have stated that incentives to the renewable industry will generate substantial business and employment to help the U.S. recover from its current economic crisis. In the long term, the federal government will spend federal money to pay for carbon capture and sequestration technology.
Coal Industry and Clean Coal
The coal-fired power generators are the largest greenhouse gas emitters. The investment climate will be much more difficult under stricter environmental regulations. The coal industry is concerned that the focus on stringent greenhouse gas laws will severely curtail their industry. The fear is that the climate change policy would destroy the U.S. coal industry that has been a pillar of energy generation for many years.
The cap and trade legislation will motivate carbon capture and sequestration for coal-fired power plants. There is a basic risk that, absent such technology, new construction of traditional coal-fired power plants would not be possible. One critical problem is that long term predictions about submarine or underground sequestration or storage tightness are difficult and uncertain. The CO2 could leak from the storage and ultimately appear in the atmosphere.
Clean coal is an umbrella term used in the promotion of the use of coal as an energy source by focusing upon new methods to reduce its environmental impact. These efforts include chemically washing minerals and impurities from the coal, gasification, treating the flue gases with steam to remove sulfur dioxide and carbon capture technologies to capture the carbon dioxide from the flue gas. These methods and the technology used are described as clean coal technology. The coal industry and its supporters use the term clean coal to describe technologies designed to enhance the efficiency and the environmental tolerability of coal extraction, preparation and use, with no specific limits on any emissions, particularly carbon dioxide.
Some experts have estimated that commercial-scale clean-coal power stations (coal-burning power stations with carbon capture and sequestration) will not be commercially viable and widely adopted before 2020 or 2025. This time frame is of great concern to environmentalists because there is an urgent need to mitigate greenhouse gas emissions and climate change.
A fundamental question is how the federal government will move the U.S. from petroleum and coal use without slowing the economy. Although Obama has mentioned that the transition to a low carbon economy will create up to 5 million jobs, he has not offered details.
Low carbon energy will in all likelihood increase manufacturing, transportation, and material costs because of higher energy prices and place U.S. goods and services at a competitive disadvantage compared to economies that lack these emission standards, including China, India, Russia and South American and Middle Eastern countries. Moreover, it appears unlikely that our government has the capacity to enact expensive climate change policies during this period of severe economic downturn and the need to focus on recovery from the U.S. recession.
Next Generation Fuels
To the extent that oil and coal industries will have a reduced portion of energy production, it is anticipated that a combination of biofuels, natural gas and nuclear industries could experience rapid growth.
In the biofuels segment, next-generation fuels such as cellulose and algae-based ethanol and biodiesel will be advanced under the new energy and environment policies.
The natural gas industry should also benefit because natural gas emits half the greenhouse gas pollution of conventional coal energy production. Moreover, the U.S. has large domestic natural gas resources. It is possible that the government may approve the conversion of a significant proportion of American transportation vehicles to run on natural gas.