Obama’s Energy Policy: The Balancing Act

In the highly polarized political arena of today, it has become exceedingly difficult, if not impossible, for policies to satisfy competing interests. Yet within the energy and environmental space, however, the Obama administration has tried to do just that. Over the last two years and particularly during his 2012 re-election campaign, President Barack Obama has pushed for an “all-out, all-of-the-above strategy,” as he called it in his 2012 State of the Union Address, to develop “every available source of American energy.”

That strategy represents a notable shift from the rhetoric of his 2008 campaign and the early months of his administration, when he emphasized reducing fossil fuels consumption and spurring clean energy investment in the name of combating climate change. On the 2012 campaign trail, by contrast, Obama has been quick to note the rapid domestic expansion of oil and gas production on his watch, and has highlighted his efforts to improve fuel efficiency and alternative energy development in the context of cost-reduction and job creation. The result has been a pragmatic and flexible approach to energy policy that attempts to appeal to all segments of energy interests, from oil companies to green energy advocates.

The platform

The energy plank in the 2012 Obama campaign platform advocates the need to “take control of our energy future” by encouraging the development of domestic fossil fuels and alternative energy sources alike. The goal of achieving “energy independence” by replacing imports of oil from outside North America with domestic production has also been a theme for the energy strategy of Obama’s Republican challenger Mitt Romney. However, Obama and Romney differ significantly in their proposals to regulate U.S. oil and gas drilling and production, and for President Obama domestic fossil fuels development is part of a broader push towards a more diverse energy portfolio.

The Obama administration’s 2011 Blueprint for a Secure Energy Future (a one-year progress report can be found here) outlines the president’s “all-of-the-above” energy strategy with three objectives in mind:

  • Develop and secure America’s energy supplies
  • Provide consumers with choices to reduce costs and save energy
  • Innovate our way to a clean energy future

Here the Obama administration frames its energy policy as a significant step towards increased U.S. energy security, relief from high oil prices, and the increased adoption of clean energy sources and higher fuel-efficiency standards. The Blueprint serves as the policy foundation for the 2012 Obama campaign energy platform, so we can examine the platform itself through each of its three goals:

Develop and secure America’s energy supplies. The Obama campaign calls for expanded production of domestic oil and gas resources, in order to reduce reliance on foreign energy supplies, expand supply in the face of high oil prices, and encourage power companies to switch from coal to cleaner-burning natural gas. The administration plans to encourage “safe, responsible development” of both oil and gas through leasing public lands for development and tightening federal drilling, leasing, and safety regulations.

Provide consumers with choices to reduce costs and save energy. Obama has made increasing energy efficiency standards the focal point of this initiative. His plan would call for an average fuel economy of 35.5 miles per gallon (mpg) for new cars and trucks by 2016, with a mandate for automakers to increase standards to 54.5 mpg by 2025. The plan also advocates continued investment in electric vehicle components, advanced biofuels, and subsidies towards energy efficiency upgrades of homes and commercial buildings.

Innovate our way to a clean energy future. Obama has called for continuing the deployment of renewable energy sources, expanding subsidies to clean energy research and manufacturing, and continuing existing programs such as the Production Tax Credit for wind and biomass energy. Additionally, federal subsidies would continue towards developing carbon capture and sequestration (CCS) technologies for “clean coal” power generation. Also included in the Obama energy plan is a renewed push for a Clean Energy Standard, a credit scheme for electric utilities that would set a target of generating 80 percent of electricity from clean energy sources – including renewables, nuclear, “efficient” natural gas, and clean coal – by 2035.

Expanding energy policy to “all of the above”

In the first months of his presidency, Obama centered his energy policy on reducing oil consumption and embracing green energy initiatives, with a broader aim of reducing carbon emissions linked to global warming. Towards those ends, he pursued higher vehicle fuel-efficiency standards, removed federal barriers to regulating automobile tailpipe emissions, passed a $90 billion stimulus towards clean energy investments, and spoke of creating a “new American energy economy.” Three years later, by contrast, oil and natural gas share top billing with clean energy initiatives on the president’s energy plan. The White House proudly points out that U.S. domestic oil production is at its highest level in over a decade and net oil imports are the lowest in 16 years, while domestic natural gas production has reached all-time highs.

The anemic economic recovery has prompted a shift towards an energy policy more inclusive of fossil fuels. Stubbornly high unemployment, coupled with high oil prices for most of the past four years, have forced the administration to weigh clean energy policies and regulations by their impact on jobs figures and individual American purse strings. During the same period, the energy sector has enjoyed spectacular growth as technological advances have helped unlock vast new domestic reserves of oil and natural gas, generating hundreds of thousands of energy, manufacturing, and services jobs. With economic revival as his foremost policy priority, President Obama has not been willing to risk slowing growth by curbing domestic fossil fuel production. The 2012 election has only amplified that political consideration, with both Obama and Romney offering visions of economic growth powered by fossil fuels.

A pragmatic balance?

By its very nature, the Obama all-of-the-above energy plan is a policy strategy of compromise. Economic constraints have made it politically costly for the president to count out fossil fuel development; and since the failure of a cap-and-trade plan in 2010 and strong Republican gains in that year’s congressional elections, any broad legislation targeting climate change or carbon emissions has faced slim chances of passing. All-of-the-above has emerged from these circumstances as a middle ground. It has a broader goal of moving towards a cleaner, more efficient energy economy, yet it recognizes the foundational role that oil and gas will play for the foreseeable future.

As with other policy compromises, it has come under fire from both sides of the political aisle. The prominent role given to oil and gas in Obama’s energy policy, as well as the inclusion of coal in the mix, has unnerved many environmental and green advocates who enthusiastically backed him in 2008. Climate change did not come up even once as a talking point in any of the presidential debates, and green activists have been frustrated by what they see as “climate silence” on the part of the presidential campaigns. Meanwhile, energy industry leaders, the expected beneficiaries of the president’s pivot towards oil and gas, continue to fulminate over the administration’s rejection of the Keystone XL pipeline and its decision not to expand offshore drilling on the Atlantic coast. Conservative policy analysts, such as Nicolas Loris of the Heritage Foundation, have derided subsidies towards CCS technology and renewable energy as “wasteful and an economic drain” while warning that new regulations on coal-fired power plants will “drive up energy costs for American households and businesses.”

The all-of-the above policy has had notable public shortcomings – several of the renewable energy firms receiving federal stimulus funding, including the infamous Solyndra, have gone bankrupt, and CCS technology may prove uneconomic – but it has also taken momentous steps towards a cleaner energy economy.  Renewable electricity generation capacity has doubled since 2008. The administration has moved towards enacting the first-ever cap on carbon emissions of new power plants, and it has worked with the auto industry to put ambitious vehicle fuel economy standards in place. The policy has had little to do with the boom in natural gas, but its regulatory measures have only accelerated the longer-term shift of many utilities from coal to natural gas in power generation. That switch to gas-fired power has helped bring U.S. energy-related carbon emissions to their lowest levels in 20 years, and will continue to reduce carbon emissions over the long term.

Though it has been dismissed as weak by some and political posturing by others, an all-of-the-above energy plan has some real merits. In particular, it carries the potential to gradually point U.S. energy policy in a more sustainable direction with minimal disruption to the current energy economy. It does not threaten to snuff out the boom in domestic oil and gas; it instead seeks to put regulatory policies in place to ensure that development can continue while minimizing the risks of environmental damage. It may not explicitly focus on the threat of climate change, but it encourages greater energy efficiency and reductions in carbon emissions through regulatory standards and the encouragement of cleaner energy technologies. A compromised policy is not an easy sell, but in an area as complex as the energy economy, it may be one of the few feasible steps forward to a future of lower carbon emissions, given the current economic and political environment.