Many economists say that a cap-and-trade system would be a cheaper and more effective way to reduce greenhouse-gas emissions than a requirement that utilities use certain sources of electricity. It would give emitters more flexibility in how they reduce their emissions, and allow them to purchase extra allowances if measures to reduce emissions are too expensive. Cap-and-trade programs are also more comprehensive than electricity mandates, since they typically cover carbon emissions from sources other than electricity generation. According to Robert Stavins, director of the Harvard Environmental Economics Program, clean-energy standards “would be less effective than a comprehensive cap-and-trade approach, would be more costly per unit of what is achieved, and yet, ironically, appear to be much more attractive to some politicians who strenuously opposed cap-and-trade.”
In addition to supporting a clean-energy standard, Obama also called for more spending on clean energy R&D, funded in part by collecting $4 billion more in taxes from oil companies. “Instead of subsidizing yesterday’s energy, let’s invest in tomorrow’s,” he said. It could be difficult to convince House Republicans to go along with this. They’ve have demanded that spending increases be offset by spending cuts elsewhere in the budget, rather than by raising taxes. Still, overall, energy-related research has strong bipartisan support.
The first test of Obama’s approach will come in March, when the current continuing resolution that’s funding the federal government expires. It will likely be replaced by another continuing resolution, which typically keeps funding at the previous year’s levels. Some Republicans have proposed funding the government at 2008 budget levels. That would involve cuts to energy R&D, and could hurt the new Advanced Research Projects Agency for Energy, which has bipartisan support, but has so far only received onetime funding from the 2009 Recovery Act, and not from the regular budget. Later this year, Congress will take up the president’s budget for the 2012 fiscal year. He will release his budget in the middle of February, but Congress doesn’t usually pass budget bills until late in the year.
A clean energy bill could come from Sen. Lindsay Graham (R-South Carolina), who last year worked with Democrats on energy and climate legislation, and has supported a clean-energy standard. Sen. Richard Lugar (R-Indiana) has written a bill that includes energy-efficiency measures and a “diverse energy standard” for promoting clean energy and domestic energy sources.
Another key energy issue this year is EPA regulation of greenhouse-gas emissions, which is proceeding as a result of a court order. Republicans such as Upton have strongly opposed these regulations, and are considering ways to block them.