President Obama, Leverage, and Energy Decisions

The US energy policies that get the most attention tend to be the ones related to the auto industry. There are others, but it makes sense because everyone can relate to paying for gas. I mean, who hasn’t coasted down a hill with their gas tank indicator well past E?

Energy is one of the four areas I see as the future of the US economy (Health Care, Information, and People are the others) so I pay attention to different developments that occur. President Obama during the campaign to be elected was a big proponent of renewable energy and improving the market for such technologies. Since the election though, he’s been deal making to get health care reform passed. The biproduct of this deal making is satisfying states with many coal ties. Coal, as much as oil, has a lot to loose with renewables becoming a market force.

I was delighted to see an article on called Will Obama bypass Congress on climate rules? by Maha Atal. The President has been acting as if he’s still a Senator with limited leverage. As the President he’s in a position of power for negotiations. What he needs to think about is how to not take advantage of that position. President Bush (43) did a great job of getting his ideas through and he didn’t enjoy the advantages that President Obama has.

Back to the article, President Obama has indicated to Congress that he will use his agencies, specifically the EPA, to institute regulation standards if Congress isn’t able to get their act together. Here’s an excerpt about how the EPA will handle Green House gases:

The agency’s first target as it moves towards that future? Detroit.Under the new guidelines, by 2016 automakers must reduce their fleet’s average emissions-per-mile to 250 grams. This is in addition to the familiar fuel-mileage standards set by the National Highway Safety and Transportation Authority (NHTSA).

Since there are about 9,000grams of CO2 produced by burning each gallon of gas, automakers will be able to hit the EPA’s requirements in 2016 simply by raising fuel economy to the 35 miles per gallon levels NHTSA has already ordered for the same time period.

So meeting that 2016 deadline won’t be too challenging. But after 2016 something interesting happens. With conventional gasoline technology, improvements in fuel economy move in lockstep with drops in emissions.

But conventional technology maxes out 35 mpg, which means getting lower CO2 emissions beyond thatpoint will require new technologies like electrics, hydrogen fuel cells or biofuels.

If I’m an auto industry engineer and an innovator, these last two lines are where I see $$, a new market for products and more importantly services. These areas will require knowledge workers as well as blue collar workers. If Congress wants to protect coal and oil, it is losing a great opportunity to develop markets. And it isn’t an either/or proposition.

Working Thoughts 10/14/08
Waiting in Line will Prevent another Great Depression


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