Obama announces new energy plan: Big on EVs/PHEVs

[KarenRei]

Worth a good read:

http://www.barackobama.com/pdf/factsheet_energy_speech_080308.pdf

Obama used to mainly push biofuels, which is the easy "solution" that doesn't really do much. He dedicates a little bit of his energy policy to them, but the biggest stress now is on switching from oil to electrons. A few highlights:

1) A goal of 1 million PHEVs on the road by 2015, with a focus on producing them in the US.
2) 4B$ in subsidies for industry for advanced vehicle technology, with a focus on batteries
3) A $7,000 tax credit for the purchase of such advanced technology vehicles (wow -- imagine a $20,000 Typ-1e!)
4) The entire White House fleet converted to plug-ins, as security permits, within one year of taking office
5) Half of all cars purchased by the federal government be plug-in hybrids or all electric by 2012
6) Establishment of a Grid Modernization Commission and deployment of a Smart Grid, with the federal government providing 1/4 of the cost of the upgrades.

Also in there of relevance, from the "where the power comes from" perspective:

1) 10% of US energy from renewable sources by 2012.
2) Extension of the Production Tax Credit
3) Cap & Trade

More controversial, from the power perspective:

1) 5 clean coal w/carbon capture plants
2) Lukewarm nuclear support

[gistmarrs]

That all sounds great, but where will the money come from for all of these subsidies and their administration. Probably a 30% increase in federal income tax!

Do we really need a $4 Billion subsidy for advanced vehicle technology that will most likely go to the Big Three and their lobbyests? Why not just call it the great American Automobile manufacturer bailout?

Sorry for being so skeptical, I would just prefer a much smaller government that left the business environment sort itself out.

[KarenRei]

Actually, the money sources are explained. Most of the overall $150B/10 year program is to be funded by the cap & trade system -- so, yes, it's a tax on industry, but only on polluting industry; as industry cleans up its act, the revenue disappears, which makes sense (if the world gets cleaner, you need less government subsidy to cleantech). Also, $15B/year is pretty tiny when you consider that the US's GDP is $13 trillion.

His "Green Vet" proposal should pay for itself, as you're no longer spending the money on keeping them in Iraq. Some of his other proposals should at least partially pay for themselves if not completely do so, such as switching federal vehicles over to electricity.

Not discussed in the document, but something that Obama supports: funding will also come from repealing the tax incentives for oil companies. Obama has supported the "Gang of Ten" compromise on drilling, wherein the offshore drilling issue is passed off to the states, and in turn, the tax incentives for oil companies get repealed and the money goes to funding cleantech. That'll also bring in billions.

The only part of his plan that I find somewhat sketchy is the windfall profits tax to fund a tax rebate. It really depends on the implementation, whether it's paired with anti-offshoring measures, how you deal with foreign oil companies, and so forth. If done properly, it'll amount to a gas tax with the rebate offsetting the pain for the poor. If done poorly, it'll just encourage offshoring and not really bring in much money. Another possibility is that oil companies will simply do stock buybacks and acquire other companies so as to reduce their profit -- stock and assets that they can sell at a later date. In that case, there would be no net effect from such a tax.

So, while I find that part a bit sketchy, the rest seems quite reasonable, from a funding standpoint.

Do we really need a $4 Billion subsidy for advanced vehicle technology that will most likely go to the Big Three and their lobbyests? Why not just call it the great American Automobile manufacturer bailout?

It's specifically stated as retooling credits and loan guarantees; it's not just "Here's $4B; do whatever you want with it." Only to companies that were planning to do that much conversion of their production lines to electric would it be a handout.

Sorry for being so skeptical, I would just prefer a much smaller government that left the business environment sort itself out.

Ever watched a satellite TV? Used a GPS? Done anything involving a satellite? The multibillion dollar satellite industry wouldn't exist had it not been for major early government investment in rocketry. Industry, on its own, never could have afforded to spend such tremendous money on such a risky venture with benefits so far in the future, even with such a huge potential payout. Only the government could.

Whenever realistic, I agree that the government should "butt out", so to speak, of industry's business. But I see two big exceptions: 1), the government must force the markets to fiscally account for externalities that don't show up on their ledgers, such as pollution; and 2) when an issue is critical or promises significant long-term benefits, but the capital costs are too great, the risks are too great, or the time scales too long for industry to handle on its own, the government should give it a temporary push. If we didn't have this latter attitude at all, we wouldn't even have a transportation infrastructure; we'd expect businesses to just pay for interstates on their own because it'd be in their best interest.

No problem with being skeptical, mind you. :) Differences in opinion are always welcome! If you see anything from McCain that relates to transitioning from oil to electrons, by all means, feel free to post it here for discussion. Apart from his $300m battery "prize" and his much weaker cap and trade system, I haven't seen much.

[n_dawg]

I'm glad our new president (barring massive election fraud) supports reality-based policies, not buddies'-profit-based policies.

[mmalc]

That all sounds great, but where will the money come from for all of these subsidies and their administration. Probably a 30% increase in federal income tax!

It's not clear exactly what the suggestion is here, whether for example the middle rate would increase from 28 to 58% or from 28 to 36.4%.

I agree the former introduced in one fell swoop would be crippling, but I certainly have no objection to the latter if the proceeds were spent on initiatives such as this.

I continue to fail to understand the typical American response to any suggestion that tax rates be increased. As Karen points out in more detail, sometimes the government is the body in the best position to force a strategic direction. It's hardly as if business has delivered a good result thus far.
(Imagine if over the last decade or so -- with suitable warning -- taxes on fuel had been steadily increased to European levels...)

[speculawyer]

Nice plan. And to his credit, McCain has been making some interesting proposals as well. He introduced the $300Million prize for a new battery . . . kind of a gimmick though since any such invention will already make more than $300 million from the open market. McCain also has show support for Plug-In Hybrid Tax Credit.

Either McCain or Obama will be MUCH better than the current dope but I think Obama has far less ties to the oil crowd.

[KarenRei]

Either McCain or Obama will be MUCH better than the current dope but I think Obama has far less ties to the oil crowd

Well, as of the last time I checked, Obama had gotten about $400k from oil company employees while McCain had gotten about $2m, so I think you're probably correct on that one ;)

[gistmarrs]

Whenever realistic, I agree that the government should "butt out", so to speak, of industry's business. But I see two big exceptions: 1), the government must force the markets to fiscally account for externalities that don't show up on their ledgers, such as pollution; and 2) when an issue is critical or promises significant long-term benefits, but the capital costs are too great, the risks are too great, or the time scales too long for industry to handle on its own, the government should give it a temporary push. If we didn't have this latter attitude at all, we wouldn't even have a transportation infrastructure; we'd expect businesses to just pay for interstates on their own because it'd be in their best interest.


This is my sentiment exactly, Karen. The satellite example is a great one and there are many others in American history. However, I don't think anyone needs a 'temporary push' in the right direction in the auto industry. The consumers are already voting with their purchases and companies like Aptera are able to tool up with very little capital.

That being said, I'm pretty pleased with most of what I am hearing from both candidates.

[mmalc]

Nice plan. And to his credit, McCain has been making some interesting proposals as well. He introduced the $300Million prize for a new battery . . . kind of a gimmick though since any such invention will already make more than $300 million from the open market.

This "plan" is basically pointless (an assertion I'd make regardless of the political affiliation of the sponsor).
This is promising a reward after the fact. There's already enough incentive to make people interested in pursuing the goal; what's needed is an investment of capital to fund the research needed to attain the goal.