the hard realities of energy policy in an election year

Mary Anne Sullivan, Hogan & Hartson

The campaign rhetoric of President Bush and Senator Kerry on energy policy must be viewed through the lens of the hard realities of energy supply and demand in the U.S.-that neither candidate can influence much during his political lifetime. Americans are voracious consumers of energy, and the evolution to a world of home-grown, whiz-bang technologies and fuels that will significantly reduce both U.S. dependence on imported oil and the rate at which we emit NOx, SO2, CO2 and mercury will be a slow one. This is true almost without regard to what policies are adopted.

These hard realities, combined with high oil prices and a sense that the war in Iraq was in some sense about oil, mean that both campaigns are emphasizing energy policy. While the candidates stress the differences in their policies, those differences are more rhetorical than real on many issues.

Both candidates agree that coal must be a centerpiece of U.S. energy policy and that cleaner burning technologies are important to ensuring coal’s future. Bush has his FutureGen Program, which calls for an entirely emission-free coal plant by 2025. Kerry wants to invest 10 billion federal dollars now to upgrade existing plants with available clean coal technologies. Federal support for coal gasification would seem to have a bright future regardless of who wins the election.

Both candidates favor mandatory electricity reliability standards. How can anyone oppose them? The only fight is about legislative tactics: Must they be part of a comprehensive energy bill, as Bush insists, or should they be considered now in a stand-alone bill?

Both Bush and Kerry want to provide government support for an Alaskan gas pipeline, and they agree that sooner is better. Both also support increased LNG imports. The only issues are about how to ensure safety.

Bush and Kerry likewise support many of the same energy tax credits. Bush supports extending the existing production tax credit for renewable energy for three years; Kerry would expand the range of qualifying renewable fuels and extend the credit for five to seven years. Both also want to extend the credit for ethanol and expand its production, along with other biofuels. The Kerry tax credit for hybrid and other alternative-fueled vehicles would be $5,000, while Bush proposes $4,000.

Kerry and Bush both oppose U.S. ratification of the Kyoto Protocol, but they also agree measures are necessary to reduce greenhouse gas emissions. Kerry supports re-engaging the part of the international community that has been alienated by the Bush voluntary approach, but Kerry has not said he would impose mandatory limits.

Notwithstanding these similarities, there are some stark differences. There can be no denying that Kerry’s policies are greener; Bush focuses more on expanding production of today’s fuels, while pushing the envelope in pursuit of technology revolutions for the future.

Bush support for and Kerry opposition to production of oil from the Alaskan National Wildlife Refuge gets lots of newsprint. The reality, however, is that Senate opposition to ANWR development comes from both parties. ANWR, like the debate over a liability waiver for methyl tert-butyl ether (MTBE) producers, may be most significant for the role it has played in delaying final action on a comprehensive energy bill.

While Bush has been diligent in opening federal lands to renewable energy development, he has insisted that renewable portfolio standards (RPS) should be left to the states. Kerry, however, wants a federal RPS of 20 percent by 2020, an aggressive target that offers employment and environmental benefits, but uncertain cost implications.

Bush has promoted his hydrogen vehicle initiative, a program with a very long timeline. Kerry agrees with the long-term focus on hydrogen fuels, but he also supports near-term incentives to American car makers to modernize their production lines so they can build more fuel efficient vehicles. Such federal incentives will likely come with a requirement to achieve improved efficiency, and Kerry’s prior support for a 36 mpg corporate average fuel economy (CAFE) standard may be a good indicator of his ultimate goal.

Stressing the emissions-free nature of nuclear power, Bush has taken modest, but significant steps to promote the construction of new nuclear plants, including financial assistance both for early licensing activities and new, safer nuclear plant technology. Kerry has acknowledged that nuclear power is an essential and climate-friendly part of the power supply, but he opposes the Yucca Mountain nuclear waste repository, asserting that its safety has not been demonstrated by sound science. If the waste issue is to remain unresolved for the indefinite future, with all the uncertainty that represents, the capital necessary to support new nuclear construction is unlikely to be available. Thus, in a Kerry administration, at best, nuclear would likely only hold its own.

Hemmed in as they are by electoral vote considerations and vocal constituencies, campaigns rarely produce the best thinking on tough policy issues. Here, each campaign has a few good ideas, but neither has a package that takes on the challenges we face in a truly comprehensive way. No matter who wins, there will be a lot of hard thinking and policy-making to do post-election if we are to really address the hard realities of U.S. energy policy.

Sullivan is a partner in the Washington, D.C. office of Hogan & Hartson L.L.P. and a member of the firm’s energy group.

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