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Presidential Power: Obama vs. Romney on Energy

Wednesday, August 22, 2012

The energy policy platforms of Obama and Romney diverge in three main ways.

As the 2012 election approaches, energy has become a primary point of presidential contention. Both candidates have given major speeches on energy policy and devote significant space on their campaign websites to the issue. But unlike previous elections, today’s presidential candidates often dance around specifics.

As best as we can ascertain, the energy policy platforms of Obama and Romney diverge in three main ways:

                                                • A planned vs. market energy economy, 
                                                • The importance of energy affordability, and
                                                • Views on energy independence

Let’s examine each in turn.

Planned vs. free market energy economies

Obama

From his website to his speeches, it is clear that under Obama, voters can expect a planned energy economy in which a strong federal government seeks to pick and choose promising energy startups (particularly wind- and solar-based ventures) to fund.

While Obama has claimed to support an “all of the above” planned energy economy, he puts a particular emphasis on wind and solar energy, using recent speaking engagements and his campaign website to highlight his administration’s approval of 16 large-scale solar energy projects, along with the massive increases in wind and solar electricity generation since the beginning of his presidency. In Obama’s approach, using federal money to fund developing renewables like wind and solar is the key to strengthening our energy independence and keeping the United States at the forefront of the green energy movement. He explains:

We’re going to invest in American energy. Yes, we want to continue to expand our production of oil and natural gas, but I also want to make sure we are the leaders in solar and biodiesel—the energy of the future that can help reduce dependence on foreign oil.

He also adds:

I want us to stop giving tax subsidies to oil companies that are already incredibly profitable. I want to double down on our investment in clean energy that’s never been more promising—in solar and wind and biodiesel—and put people back to work so that we can free ourselves from dependence on foreign oil and build up America.

Romney

If Obama’s agenda represents a planned energy economy, Romney’s may be seen as a free-market model that offers greater freedom and flexibility to American industry. Throughout his campaign, Romney has capitalized on the failure of Solyndra and used the story as a starting place to discuss free enterprise. On May 31, for example, he held a press conference in front of Solyndra’s shuttered headquarters, proclaiming it:

A symbol of a serious conflict of interest. An independent inspector general looked at this investment and concluded that the administration had steered money to friends and family—to campaign contributors. This building, this half-a-billion-dollar taxpayer investment, represents a serious conflict of interest on the part of the president and his team … It’s also a symbol of how the president thinks about free enterprise. Free enterprise to the president means taking money from the taxpayers and giving it freely to his friends.

Though Romney believes there is a valuable role for government money in energy development, he aims to redirect government investments toward basic research and development and particularly discourages funding “ballyhooed forms of alternative fuel [which] remain sharply uncompetitive on their own with conventional resources such as oil and natural gas in most applications.” As Romney’s “Plan for Jobs and Economic Growth” explains:

Government has a role to play in innovation in the energy industry. History shows that the United States has moved forward in astonishing ways thanks to national investment in basic research and advanced technology. However, we should not be in the business of steering investment toward particular politically favored approaches. That is a recipe for both time and money wasted on projects that do not bring us dividends. The failure of windmills and solar plants to become economically viable or make a significant contribution to our energy supply is a prime example.

There is a place for government investment when time horizons are too long, risks too high, and rewards too uncertain to attract private capital. However, much of our existing R&D budget has been devoted to loan guarantees, cash grants, and tax incentives for projects that might have gone forward anyway. As president, Mitt Romney will redirect clean energy spending towards basic research. Government funding should be focused on research and development of new energy technologies and on initial demonstration projects that establish the feasibility of discoveries. This approach offers the best opportunity to promote innovation without distorting the market.

In addition to a focus on initial demonstration projects, Romney proposes a redesign of funding sources modeled after the Defense Advanced Research Projects Agency (DARPA) model to ensure “long-term, non-political sources of funding for a wide variety of competing, early-stage technologies.” Such a plan will promote more traditional energy sources like oil, gas, coal, and nuclear. Romney will encourage these sources through a new regulatory framework, in which “all permits and approvals for exploration and development should be issued according to fixed timelines with the availability of fast-track processes. Procedures for issuing permits should be consolidated so that businesses have a one-stop shop for approval of common activities.” Additionally, he promises to reframe the nuclear regulatory structure and conduct a thorough review of the “cornucopia of carbon-based energy resources” available in the United States.

Though Romney’s free-market agenda looks promising, a central concern for voters is whether or not he’ll stick to it. Recent criticism has been leveled against the candidate for flip-flopping on his energy views (particularly with regard to his stance on wind, solar, and coal) since his time as governor of Massachusetts, and he’s been accused of skewing his platform toward the far right to curry political favor with voters.

Energy affordability

Obama

When it comes to creating an energy agenda that’s affordable, the candidates present policies voters might not expect. Obama has shown a willingness to push his planned energy agenda at any price, perhaps in an effort to attract wealthy donors more concerned with radical environmentalism than the economic repercussions of their preferred policies. A key example here is Obama’s stance on coal. In 2008, candidate Obama pledged to take action to dramatically reduce the use of coal, promising voters:

If someone wants to build a new coal-fired power plant they can, but it will bankrupt them because they will be charged a huge sum for all the greenhouse gas that’s being emitted.

For better or worse, Obama made good on his promise, proposing an aggressive cap and trade plan that would strain the U.S. economy (though estimates vary as to exactly how much it would have cost, a comprehensive study from the George C. Marshall Institute estimates that cap and trade would result in a tax increase of several thousand dollars for the average American household by 2050, a steep spike in electricity prices across the board, and job losses in the hundreds of thousands). When his policy was shot down in Congress, Obama remained undeterred. Assuring voters (and perhaps himself) that cap and trade was “just one way of skinning the cat,” he sought appeasement in the form of the Environmental Protection Agency (EPA). In March, the EPA released a set of rules that aimed to reduce greenhouse gases by placing strict limits on emissions. While many natural gas plants could meet the proposed standards, coal-burning plants were left with the choice of implementing hugely expensive carbon capture technology or, perhaps more realistically, throwing in the towel and leaving factory workers jobless.

Romney

In contrast to Obama, Romney remains wary of higher energy prices and plans to unleash the free market as a prime means of cost containment by allowing already successful industries like drilling to flourish. As he explains:

Under the robust and efficient regulatory framework just described, a Romney administration will permit drilling wherever it can be done safely, taking into account local concerns. This includes the Gulf of Mexico, both the Atlantic and Pacific Outer Continental Shelves, Western lands, the Arctic National Wildlife Refuge, and off the Alaska coast. And it includes not only conventional reserves, but more recently discovered shale oil deposits as well. When the drilling is done off-shore, the adjacent states should be entitled to a reasonable share of the revenue, just as they are now from on-shore production. Expanding energy production on this scale would bring lower prices, greater reliability of supply, and jobs, jobs, and jobs.

Of particular note in Romney’s plan is the decisive lack of power given to federal agencies like the EPA, which represents a stark contrast from Obama’s heavy reliance on such mechanisms to implement his energy agenda. This devolution of federal power is no accident, as Romney has made his views on the EPA quite clear. In the fall of 2011, he didn’t mince words when proclaiming, “the EPA has gotten completely out of control for a very simply reason. It is a tool in the hands of the president to crush the private enterprise system, to crush our ability to have energy whether it’s oil, gas, coal, or nuclear.”

Energy independence

Perhaps unsurprisingly, both candidates view energy independence as a way to decrease reliance on the Middle East. As Obama explained in a recent speech on energy independence:

We don’t want our economy dependent on something that happens on the other side of the world. We don’t want every time there’s a scare about war or some regime change in the Middle East that suddenly everybody here is getting socked and the whole economy is going down.

In a speech on March 22, he added:

As I’ve been saying for the last few weeks, we use more than 20 percent of the world’s oil, but we only have 2 percent of the world’s proven oil reserves. We could drill every square inch of this country—we can get every drop of that 2 percent—but we’d still have to buy enough from the rest of the world to meet our needs. The price of oil will still be set by the global market. And that means every time tensions rise in the Middle East, so will gas prices at home.

Romney echoes Obama’s remarks on the need for energy independence from the Middle East, explaining in his energy policy plan that “we rightly think about energy as a national-security issue.”

However firmly both candidates may agree on this end, the means by which each plans to achieve this goal differ greatly. As has been explained, Obama relies on his planned economy to pick and choose winners that will help the United States remain at the forefront of energy independence, while Romney has faith in his free-market approach. The candidates also differ when discussing oil reserves—though Obama frequently cites the 2 percent statistic mentioned above, Romney emphasizes the fact that the United States has only 2 percent of the world’s known oil reserves. He notes:

Surveys and inventories of resource deposits are decades out of date—when they have even been done at all. As a result, we have only a partial picture of the opportunities available to us. A Romney administration will conduct a comprehensive survey of our untapped resources so that policymakers and developers have a full picture from which to work.

There’s also the matter of how the candidates behave at the global level. A key point of contention that illustrates these differences in global strategy is construction of the Keystone XL pipeline, a project that could potentially allow America access to valuable Canadian oil from Alberta. For Obama, the Keystone oil pipeline represents a risky endeavor that seems to require almost limitless red tape. Despite a 3-year, 10,000-page federal review of the pipeline, construction has yet to begin.

The necessity for fast action on Keystone seems to be well understood by Romney, who promises his “approval of the Keystone XL pipeline on Day One.” Romney has repeatedly expressed his immense support for the project, as well as drilling opportunities in Mexico. His energy plan explains:

In addition to ensuring rapid progress on the Keystone XL Pipeline, a Romney administration will pave the way for the construction of additional pipelines that can accommodate the expected growth in Canadian supply of oil and natural gas in the coming years.

Conclusion

In reviewing the energy policy platforms of Romney and Obama, we see that Obama shows a distinct preference for a command-driven energy economy, while Romney strongly favors a freer, private-sector energy economy. Obama places far less emphasis on energy affordability and far more emphasis on greening the energy supply even though that raises costs. Finally, whereas Romney clearly has a goal of energy interdependence with Canada, Obama’s view of energy independence is more a “go it alone” approach, where pipelines to Canada need not apply.

Kenneth P. Green is a resident scholar at the American Enterprise Institute, where Elizabeth DeMeo is a research assistant.

FURTHER READING: Green also writes “Subsidy-Powered Vehicles,” “Dissecting the Carbon Tax,” and “Energy Abundance vs. the Poverty of Energy Literacy.” Mark J. Perry discusses “President Obama's Some-of-the-Above Energy Policy” and says “Carbon Tax Proposal Will Hobble Our Already Challenged Economy, Stall Growth.” Claude Barfield asks “The First Carbon Trade War?

Image by Darren Wamboldt / Bergman Group

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