Energy and the Economic Bailout

News of the $700 billion economic bailout plan, which failed in Congress yesterday, has eclipsed some notable developments in energy policy over the last week. The coverage of those developments was there, however, and it was as sobering as the coverage of Wall Street’s downward spiral. A number of journalists are now starting to connect the two stories.

The New York Times set the stage for a week’s worth of reality-check journalism with the latest installment of its recurring special section, The Business of Green, published last Wednesday. The lead story describes the vehicles-vs.-infrastructure stalemate between the auto and energy industries, which has likely delayed the introduction of hydrogen-powered cars for another ten years. The second piece explains why coal will be a “tough habit to kick” for at least that long, with overall demand for fossil fuels growing despite relative market gains by renewable energy sources such as wind and solar. And a third article explains why massive solar power installations in western deserts are now, ironically, drawing criticism from environmentalists. A few articles in the back of the section were slightly more sanguine (and there was the announcement of the Times new Green Inc. blog), but the section’s larger takeaway message was clear: the future of clean energy is uncertain.

Now set that against the backdrop of the United States’ worst financial crisis since the Great Depression and two presidential candidates who have made energy a central (if not the central) theme of their campaigns. It's not hard to see that journalists have their work cut out for them. Jim Lehrer seemed to recognize that during last Friday’s presidential debate, when he repeatedly asked Barack Obama and John McCain to specify which programs they would cut to help pay for the bailout. Both men tried hard to duck the question, but quickly turned to energy and eventually suggested that they would at least consider cutting some of their programs.

What makes this issue so central to this election, not to mention the bailout, is that Obama and McCain agree that the future of the American economy will be founded, in large measure, on energy technology. But they clearly disagree about how that economy should come together, the most fundamental points of departure being their positions on offshore oil drilling, oil and ethanol subsidies, and cap-and-trade standards. On Sunday, New York Times columnist Tom Friedman, who has predicted that energy will be the "next great global industry," argued that that the cleaner the plan, the better:

The point is, we don’t just need a bailout. We need a buildup. We need to get back to making stuff, based on real engineering not just financial engineering… Indeed, when this bailout is over, we need the next president — this one is wasted — to launch an E.T., energy technology, revolution with the same urgency as this bailout. Otherwise, all we will have done is bought ourselves a respite, but not a future. The exciting thing about the energy technology revolution is that it spans the whole economy — from green-collar construction jobs to high-tech solar panel designing jobs. It could lift so many boats.

Yesterday, a Times editorial reiterated Friedman's call for investment in clean power, but directed its attention toward Congress's other eleventh-hour policy predicament: soon to expire tax-credits for renewable energy. After Congress allowed the longstanding moratorium on offshore oil drilling to expire last week, the editors wrote:

Congress has one more chance for a small measure of redemption. Both the Senate and House have approved bills that would extend tax credits for renewable energy sources like wind and solar power, for the next generation of hybrid cars and for energy-efficient homes and commercial buildings. All these credits are useful, but in the case of wind and solar power they are absolutely essential.

At Green Inc., the paper's new blog, Kate Galbraith reasons that the failure of the bailout package might be a "boon for renewables", because, having planned to adjourn, Congress will now remain in session and "could get other work done in the meantime."

If the federal government doesn't act, policy developments at the state level might promote clean energy instead. At the end of last week, as the stock market tumbled, ten northeastern states launched the Regional Greenhouse Gas Initiative, the first U.S. cap-and-trade system. On Thursday, the ten states participated in an auction for 12.5 million one-ton carbon emission permits. The bidding occurred as numerous journalists speculated anxiously (remember the European Trading Scheme) about the results, which they had to wait through the weekend to receive. With that information now available, Reuters reports that the auction generated $39 million for the participating states. And Keith Johnson, at the Wall Street Journal's Environmental Capital blog, surmises that demand for the permits "was actually pretty strong," though not strong enough to make them as expensive as hoped.

At any rate, the Western Climate Initiative, a similar cap-and-trade pact among seven states and four Canadian Provinces whose broad outline was released last Tuesday, is "more ambitious," concluded New York Times reporter Felicity Barringer on the Green Inc. blog. But that plan, which won't begin until 2012, still has been many "obstacles" to face in both conception and implementation, according to two stories by the Associated Press. And even if both plans were to succeed, as one source told Johnson in his Journal post about the northeastern cap-and-trade scheme, regional policies just won't cut it. According to Johnson, that:

[P]asses the buck back to Senators McCain and Obama. How will the U.S., shackled with the double whammy of a possible recession and the cost of the financial bailout package, muster the resources to launch a nationwide, economy-wide climate-change scheme?

What he really means is a nationwide, economy-wide energy scheme. Obama and McCain don't talk about cap-and-trade, a climate policy, much these days. With the economy tumbling, they try to keep it positive by talking about investing in clean energy or energy independence. It used to be that those regulatory and market-based approaches were just two sides of the energy package's coin. Wall Street's slow, and then alarmingly rapid, decline may have changed that. The question for journalists is whether energy policy will be the victim of, or part of the solution to, that crisis.