We recently sat down with Madhuri Kommareddi, a member of Obama's policy staff, to discuss the Senator's plan for a clean energy future. Look for more "Ask a policy wonk" features in the futurethat will help explain Obama's positions on the critical issues in this election.
Can you give a bit of background about the current state of environmental policy? Every president since Nixon has talked about the need the get off foreign oil and it hasn’t happened—nothing even close. The will and effort haven’t been put into making anything happen. What’s unique about Obama is that he’s got a strong environmental track record. In addition, he has brought a lot of unlikely allies together in the Senate when he put forward his proposal on CAFE standards, and has placed climate change and energy independence near the top of both his domestic and international agendas. The proposal he unveiled last Monday is the most comprehensive plan that anyone has put forward. And Obama’s not just saying he wants to reduce emissions by 80% by 2050; rather, he put out detailed policies and strategies about how we’re going to make this happen. His ideas build off of what folks all over the country have discovered really works best to reduce emissions, grow American economy jobs and reduce energy costs for consumers.
Read the full interview after the jump.
For those of us who are not familiar with environmental policy, can you explain what cap-and-trade is? Well, first we have to start with what the emissions system today is like. Today polluters just pollute freely. You can put as much carbon as you want into the air and no one is stopping you. And this is a huge problem because carbon emissions are the main source of man-made climate change. The Obama plan sets a cap on emissions – our long term goal is to reduce carbon emissions by 80% below 1990 levels by 2050. But we also have interim caps to ensure we actually meet our long-term goal. We’re going to reduce emissions to 1990 levels by 2020. Obama wants to show the American people he is serious about making progress now, rather than putting it off into the future. Obama’s proposal requires all polluters to pay. If you’re a polluter in this country you can no longer pollute for free. You have to pay. This is where the auction comes in. The government isn’t going to say, ‘this is how much you have to pay.’ Instead, we’ll let the market decide the price by allowing companies to purchase credits in an auction. The next part of how this works is trade. Each year, the government will determine – based on what scientists tell us – how much we need to cut emissions by this year to reach the long term goal. Based on what that cap is that year, the government will issue allowances (also known as permits) that companies will need to purchase under the Obama plan. If you’re a large polluter, you’ll have to purchase a large number of credits. If you’re a small polluter, you’ll only have to purchase a small number of credits. Let’s say a company reduces their emissions throughout the year; then, they can sell their extra allowances to the companies that pollute more.
Why this system instead of carbon tax? What’s important to note is that we’re implementing a 100% auction of cap-and-trade credits. This has the same effect as carbon tax—because it raises the costs of polluting and everyone has to pay. The benefit of this is that it’s more flexible and market driven. The government is susceptible to lobbying from oil companies and coal companies and if the government is setting a price through a carbon tax, they’ll be subject to these pressures. We’ll also need perfect information to determine the right price. How much will ensure companies don’t just continue polluting? How much is enough to not hurt consumers? The government isn’t the perfect analyst of what to do here. This is an area in which market forces can create better results. What will be done with the revenue of these credit sales? We’re going to be spending $150 billion over ten years in a variety of ways that will transition us into a clean energy economy and also make sure American workers benefit from this transition. This is the most comprehensive set of investments of any of the major presidential candidates. All of the spending comes from revenues of the cap and trade program. So this proposal is actually revenue neutral (we won’t need to raise taxes or cut spending in other areas). The biggest proposal, which is unique, is that Obama will invest $10 billion per year for five years into what we call a Clean Technologies Deployment Venture Capital Fund. Venture capital money has been pouring into green technologies past few years, but there is a disconnect between where the money is going and what the market really needs right now. The gap is referred to as “the valley of death” -- the space between products at the lab and getting them to the marketplace. Right now, for example, we have small plants that produce cellulosic biofuels, but the cost of building the first commercial-scale plant can costs hundreds of millions of dollars, even up to a billion dollars. The private sector, because the risk is so high, doesn’t have the desire to invest here, because you’re taking something and putting it into the market for the first time. This is where the government can really step in and be helpful. The venture capital fund is modeled on the In-Q-Tel program, which is funded by the CIA but independently governed by a board of venture capitalists. They work in conjunction with the CIA to identify ventures that will benefit intelligence capabilities. It’s been very successful; they hope to be self-sufficient in a few years, so it won’t need anymore CIA money because they’re starting to get money back from their investment. What we think is the real advantage of this is that it will be governed by venture capitalists. A lot of federal government money may not be effectively spent. This is an innovative way to use the successes of the private sector to more effectively spend federal money. The government also has an imperative to step in address this problem because climate change and our dependence on foreign oil present us with economic, security and moral imperatives. What kind of jobs will be created? This presents a huge opportunity for the US. Millions of jobs will be created and many of these jobs can’t be exported. Biofuels need farmers to produce the corps, and folks to refine biofuels here. There’s also going to be jobs from efficiency improvements, for example, construction jobs, jobs to weatherize people’s homes (make them more efficient for heating and cooling), jobs installing solar panels, and the list goes home. And there’s a huge opportunity here to manufacture energy efficient, green technologies here at home. We have a very skilled workforce that can manufacture these technologies and Obama will make targeted investments into training individuals to take advantage of this new market in green technology. He’ll also work to modernize American manufacturing centers to produce these technologies. What will the international impact of this plan be? The Bush administration has truly been asleep at the wheel. We haven’t engaged with international community on climate change in any serious way since Bush has been in office. Obama will reengage the US in international talks. By enacting domestic mandatory caps, the world will take us much more seriously. That’s how we’re going to bring something serious to the table to engage developing nations, who are right now not a part of mandatory climate agreements. In China and India, millions of new cars are coming onto the road, new coal plants are being built, and there are huge increases in emissions. We need to bring them to table because the problem is not only global, the solution is as well. Under Obama’s plan, there will be a new Global Energy Forum, which will be the G8 nations plus the five other biggest emitters (including China and India). We’ll also take a leadership role in exporting US technology. We’re going to be really investing in building green technologies. This is a huge export opportunity for the US also but huge opportunity to help developing countries reduce their emissions.
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