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Although the credit crisis and the economy are framing the election, Sens. John McCain and Barack Obama have discussed and taken significant policy positions concerning energy development and regulation of greenhouse gas emissions during the debates and in position papers.

While the candidates and House and Senate leaders also identify global warming as a priority issue for 2009, concern regarding compliance costs may delay or diminish federal legislation to limit greenhouse gas emissions. Thus, the candidates’ spending priorities may shape their leadership on energy and climate change as much as their stated policies on these subjects.
McCain’s Web site states that national climate policy: (a) should be based on scientifically sound mandatory emission reduction targets and timetables; (b) should utilize a market-based cap and trade system; (c) must include mechanisms to minimize costs and work effectively with other markets; (d) must spur the development and deployment of advanced technology; and (e) must facilitate international efforts to solve the problem.

McCain envisions a cap-and-trade system by sectors that will set limits on greenhouse gas emissions while encouraging the development of low-cost compliance options. Market participants would be allowed total permits equal to the cap on greenhouse gas emissions.
The system would allow entities to buy and sell rights to emit greenhouse gases, and participants that can invent, improve or acquire ways to reduce emissions can sell their extra permits for cash to market participants that need them. The cap on greenhouse gas emissions would be reduced over time to 2005 levels by 2012, to 1990 levels by 2020, to 22 percent below 1990 levels by 2030 and to 60 percent below 1990 levels by 2050.

Under McCain’s plan, permits would eventually be auctioned, but initially, some or all permits would be free and the percentage of each would be determined by a commission. Auction proceeds would be used to support the development of advanced technologies, to support research and commercialization ranging from carbon capture and sequestration, to nuclear power, to battery development. Auction proceeds would also be used to reduce impacts on low-income families and to fund transition assistance for consumers and industry.

When asked to prioritize health care, energy, and entitlement reform at the second debate, Obama responded that energy was his first priority. On his Web site, he identifies immediate relief from high energy prices as an immediate priority and climate change as a mid- to long-term solution to address the nation’s energy challenges – dependence on foreign oil and global climate change.

Obama favors an economy-wide cap-and-trade system to reduce carbon emissions to 80 percent below 1990 levels by 2050. He advocates a 100-percent auction to ensure that industries pay for every ton of emissions released rather than a system that gives some or all emission rights away for free. $15 billion per year of auction proceeds would be invested in the development of clean energy, energy efficiency, next-generation biofuels, clean-energy vehicles, and habitat restoration and efforts to assist fish and wildlife to adapt to climate change. The remaining receipts would be used for rebates and transition relief to assure that families and communities are not adversely impacted by the transition to a new-energy, low-carbon economy.

Not surprisingly, Obama’s priorities for energy and climate change align more closely with recent Oregon executive policies and legislation, which reflect Democratic control of Oregon’s legislature.

Oregon has taken recent executive and legislative actions to promote renewable energy, including legislation mandating a reduction in Oregon’s greenhouse gas emissions to 10 percent below 1990 levels by 2020 and to 75 percent below 1990 levels by 2050. Oregon’s statute does not mandate a cap-and-trade system, but, to meet these standards, Oregon is working within the Western Climate Initiative to enter into a regional cap-and-trade system that will launch Jan. 1, 2012.

Additionally, Oregon has adopted a renewable portfolio standard mandating that 25 percent of power sold by large utilities to retail customers in 2025 must come from sources such as wind, solar, wave, geothermal and biomass. There are interim targets for large utilities and lower 2025 targets for smaller utilities.

Oregon is positioning itself to be among the nation’s leaders for renewable power. Significant wind-power projects in Oregon are fully operational, more projects are in development, and observers expect generation of wind power to double in the next few years. Geothermal exploration is occurring currently in Central Oregon, and companies are beginning to explore wave-power projects along the Oregon coast.

Based on voting history, stated policy objectives, and political philosophy, Obama is more likely to advocate federal financial support for renewable power projects and biofuels. McCain is more likely to advocate federal financial support of nuclear power and fossil fuel exploration projects. McCain’s plan supports renewables in principle but relies more on free market approaches to renewable power project development than government stimulus or support.

While both candidates support cap-and-trade systems, Obama would pursue an economy-wide program with immediate and full auctions of rights to emit greenhouse gases while McCain favors a more cautious approach targeted to the sectors that emit 90 percent of greenhouse gases, with exemptions for small business and a phase-in of a system to auction rights to emit.

In the next few years, federal, regional and state initiatives will affect most or all businesses that emit greenhouse gases. Oregon businesses should track proposed federal energy and climate change legislation in 2009. Businesses that are significant electricity consumers should monitor legislation for its potential impact on energy costs. Finally, a legislative emphasis on renewables will stimulate business opportunities in Oregon, even for businesses that are not traditionally part of the energy sector.

Attorney Peter Sergienko is a partner at Davis Wright Tremaine, a law firm in Portland.  He specializes in environmental law, real estate law and climate change. Contact him at [email protected] or 503-241-2300.