Energy: Lay Out Clean Rules—and Fast

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Jigar Shah, Founder of SunEdison Mike McGregor

Incentives for wind power are needed Tate Michael Davidson/Photodisc/Getty Images

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There's remarkable agreement on the general outline of a new energy strategy. It would include efficiency measures such as tougher appliance standards and funding for weatherization of buildings. It would boost all forms of low-carbon-emitting energy, from renewables to nukes and "clean" coal (where CO2 emissions are captured and stored). It would open up more areas to drilling.

"There's this image that Republicans are just for drilling, and Democrats are just for efficiency and renewables," says Tom Kuhn, president of the Edison Electric Institute, which represents utilities. "We don't have the luxury of picking one or the other. We really need to have it all." Dow Chemical (DOW) CEO Andrew N. Liveris warns that "other countries are putting in place very, very sound energy policies that include all of those components. Without an energy policy, our industry will continue to build factories [and send] jobs overseas."

The strategy must also explicitly tackle global warming, executives insist, since climate and energy are inextricably linked. Companies need to know how much the government will limit greenhouse gas emissions and how this will affect the cost of fossil fuels. "We must enact mandatory climate legislation, and pass it soon," says John Rowe, CEO of Chicago electricity generator Exelon (EXC).

What's Likely to Happen

There will be action, although fights over the details will be contentious. "This is one issue that, if done well, could be accomplished even in this tough economic environment," says Cal Dooley, president and CEO of the American Chemistry Council. It helps that energy and climate policy increasingly is seen as a way to stimulate the economy. "Clean energy means green jobs," argues Barbara Boxer (D-Calif.), chairman of the Senate Environment & Public Works Committee. Jigar Shah, founder of SunEdison, a solar company in Beltsville, Md., says that if the government led by example and made its own buildings greener, thousands of jobs would be created, and "the net cost could be zero, because it will save so much energy." Fund home energy-efficiency retrofits, mass-transit systems, carbon-capture pilot projects, and other measures, and the nation would see a green recovery, many experts argue.

It helps that Obama has made energy a top priority and has a respected group of advisers, led by Jason Grumet, president of the nonprofit Bipartisan Policy Center. Energy proposals in Congress often have sunk due to partisan wrangling. But as executive director of the National Commission on Energy Policy, Grumet oversaw the creation of a bipartisan plan that tackled everything from auto fuel economy to natural gas supplies. In the past few months, Congress itself has taken steps toward a compromise.

Still, hashing out the fine points won't be easy. Industries that depend on natural gas are lobbying to allow drilling on the outer continental shelf closer than 50 miles offshore, which environmentalists oppose. Utilities with nuclear plants want permits to emit carbon to be auctioned, while those with dirtier coal plants insist the permits be given out. Battles simmer over fuel economy rules, requirements that biofuels have low carbon footprints, the number of new nuclear plants, and other issues.

The new President can, however, accomplish a lot through regulation. He can raise efficiency standards, change building codes, and give the Federal Energy Regulatory Commission more authority to get transmission lines built. Grumet has said that Obama is even prepared to regulate greenhouse gas emissions under existing laws. That's fiercely opposed by the U.S. Chamber of Commerce and many companies, who expect to get a better deal in Congress, but the threat will pressure lawmakers to act.

Ultimately, the amount of change will depend on the President's ability to convince Americans that their long-term future depends on an energy transformation. Plextronics' Hannah is hopeful. "Obama truly understands the convergence of technology and energy and how it can drive the economy," he says.

Return to the Obama Election 2008 Table of Contents

Carey is a senior correspondent for BusinessWeek in Washington.

The following reporters contributed to this special election package under the direction of Chief of Correspondents Joseph Weber: Peter Burrows, Roger Crockett, Aaron Pressman, Aaron Ricadela, Arlene Weintraub, Jena McGregor, Rob Hof, Amy Barrett, Manuel Baigorri, Kerry Capell, Emily Thornton, Jon Fine, Nanette Byrnes, Lauren Young, Amanda Zusman, David Kiley, Burt Helm, Arik Hesseldahl, Matthew Boyle, Gene Marcial, and Christopher Palmeri