Administration urged to develop comprehensive energy spending plan

Depending on how you do the math, the 2009 American Recovery and Reinvestment Act contains about $60 billion in spending aimed at reducing the country's dependence on foreign oil and cutting greenhouse gas emissions that contribute to climate change. Those twin policy goals can be seen in investments to develop and promote alternative and renewable fuels, overhaul the electricity grid to make it more efficient, and induce Americans to drive more fuel-efficient automobiles and weatherproof their homes.

But against the backdrop of a $14 trillion economy, that money might have very little impact on the direction of U.S. energy policy, said Doug Holtz-Eakin, a former director of the Congressional Budget Office who served as senior policy adviser to Sen. John McCain during the Arizona Republican's bid for the presidency in 2008.

The federal government "is a terrible venture capitalist and the last thing you want to do is pretend that you can make it one," Holtz-Eakin told attendees of the Reform Institute's national energy symposium in Washington on Tuesday.

Government should provide basic research and create incentives for innovation and the rapid deployment of cutting-edge technologies, Holtz-Eakin said.

The problem with the energy-related components of the stimulus plan is they do little to stimulate the economy, and they don't make for a coherent energy policy, he said: "By being neither fish nor fowl, they will accomplish a lot less than was intended."

A comprehensive energy policy needs to be about more than just diversifying the portfolio of sources, said Denise Bode, chief executive officer of the American Wind Energy Association trade group, during a panel discussion with more than a dozen experts following Holtz-Eakin's remarks.

A meaningful policy must consider the needs of the domestic manufacturing base as they relate to renewable energy development, she said. Federal investments in renewable fuels to date have primarily consisted of short-term tax benefits, which make it hard for developers and manufacturers to attract the needed capital investment.

"You have to have long-term commitment," Bode said. "This cannot be driven by on-again, off-again tax policies."

Perhaps the most difficult challenge for the administration and Congress will be to figure out how to set a price on carbon emissions, either through a cap-and-trade policy or through a carbon tax. Without such monetary incentives it will be difficult to fund alternative fuels and propel the petroleum-based economy in another direction.

"Virtually every [fuel] that's clean is more expensive," said B. Keith Trent, a senior executive at Duke Energy.