Obama: What He Means for Clean Energy Investors

Barack Obama, the 44th president of the United States, takes office in January. When Obama announced his candidacy in February 2007, the world was a different place; the …

Barack Obama, the 44th president of the United States, takes office in January. When Obama announced his candidacy in February 2007, the world was a different place; the war in Iraq was widely regarded as the key issue of the election.

What a difference an economic crisis makes.

The fallout of the subprime lending crisis took its toll and the U.S. economy fell into the deepest economic crisis in the country since the Great Depression, marked by skyrocketing foreclosure rates, widespread job losses, rising fuel, food and other consumer goods prices, stagnant wages, a record-breaking federal debt, a frozen credit market and extensive measures taken by the federal government to try to clean up the mess, most notably a $700 billion bailout bill and the seizure of Fannie Mae and Freddie Mac.

Thus, the economy quickly came to be the foremost issue in the minds of the American electorate; 63 percent of voters who took part in exit polls on election day said that the economy was their biggest concern, compared to the 2004 presidential election, when 18 percent of voters cited the economy as their biggest concern. And, because 80 percent of Americans believe the nation is on the wrong track, according to recent polling, “change” was the key word of this year’s presidential campaign.

One of the Obama campaign’s messages was that Obama represented a shift in economic policies compared to President George Bush and his administration. Obama’s plans for energy and environmental policies represent another dramatic shift from those in place under the current president.

Though his ability to spend is likely to be hampered by the economic crisis to some degree, Obama has grand plans for boosting the economy, creating jobs and eventually ending America’s oil addiction—particularly the country’s addiction to foreign oil—by enacting his New Energy for America plan, which has multiple prongs for short-term to long-term benefit.

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“Barack Obama’s green energy platform has gained him fans among that industry’s most powerful [people]—its investors,” earth2tech reported. During the general election, investors backing cleantech companies donated six times more money to Obama than they did to his Republican opponent for the presidency, John McCain.

Obama’s comprehensive energy plan entails putting $150 billion over 10 years into clean and alternative energies; he has also set an ambitious goal of bringing greenhouse gas emissions down to 80 percent below their 1990 levels by 2050; and he proposes managing out of control carbon emissions with a cap and trade system.

“Even though emissions limits are defined by the government, cap and trade is widely seen as a fair, market-driven way to, in Obama’s words, make ‘dirty energy expensive,'” according to the Los Angeles Times. “Cap and trade auctions would channel $30 billion to $50 billion into public coffers annually, Obama estimates.”

Pragmatism is a key to Obama’s plan, which strives for a balance between maximum economic benefit and maximum environmental benefit; for example, the U.S. has extensive natural gas resources, so even though it is a fossil fuel rather than a renewable energy, Obama is in favor of drilling the Barnett Shale, a natural gas reserve near Arlington, Texas, as well as other drilling for natural gas in other places, and he has said he considers the construction of a natural gas pipeline in Alaska to be a priority. By 2012, Obama seeks to have 10 percent of the U.S. power supply come from renewable sources, after all, and 25 percent by 2025; the plan does not include trying to force the U.S. to go cold turkey on fossil fuels.

The plan does require the oil industry to use its resources more effectively, however. “Obama and [Vice President-Elect Joe] Biden will require oil companies to develop the 68 million acres of land (over 40 million of which are offshore) which they have already leased and are not drilling on,” according to the Obama campaign’s official website.

Oil and gas investments, then, could still be attractive to investors, even as the country will be making a shift toward renewable energy. Jobs will be created in areas around the country in places where natural gas and oil are present. But one of the most lucrative natural gas investments could simply be purchasingland with natural gas deposits underneath it; gas companies interested in the natural gas deposits pay leases and royalties for the rights to the natural gas. Some unsuspecting landowners have been ripped off by unscrupulous gas company employees and speculators, but savvy investors could look to retired dairy farmer Dewey Decker as an example: Decker negotiated with the gas companies and speculators who showed up and offered him $50 per acre, eventually signing a five-year contract in which he receives $2,411 per acre and royalties of 15 percent.

But, to help the U.S. reach that goal of deriving 10 percent of its energy from renewable sources in just four years, the Obama plan will offer incentives to those trying to get there and will see to it that the big oil industry is no longer so coddled by the federal government as it is now. For example, “Obama and Biden will enact a windfall profits tax on excessive oil company profits to give American families an immediate $1,000 emergency energy rebate to help families pay rising bills,” according to Obama’s website. “This relief would be a down payment on the Obama-Biden long-term plan to provide middle-class families with at least $1,000 per year in permanent tax relief.”

Another sign of pragmatism is evidenced by the gradual tightening of standards on the struggling auto industry Obama plans, and the higher goals he has set. Concerned about their pocketbooks and their planet, consumers are shunning large cars and shifting toward smaller, more fuel-efficient cars. The industry has been slow to react, however, with the result that sales are dropping by nearly half for some; Obama’s plan would require “raising car mileage standards 4 percent annually and would encourage to the auto industry to make all new vehicles flex-fuel-capable,” according to the Los Angeles Times. Obama has also set a goal of having one million plug-in hybrid cars on America’s roads by 2015.

“To keep the technology and jobs in Detroit, the candidate would extend tax credits and loan guarantees to U.S. automakers for retooling. And to sweeten the deal for consumers—think of the premium you have to cough up to purchase a Prius—Obama favors a $7,000 tax credit per plug-in vehicle,” according to the Los Angeles Times. Thus, while some are spelling out doomsday scenarios for Detroit and other cities that depend heavily on the auto industry, these cities may yet make good investments if the auto companies can successfully adapt to the new demand for smaller, more fuel-efficient and even flex-fuel-capable cars.

But Obama wants to bring energy efficiency not just to Americans’ driveways, but to their houses. “Obama and Biden will make a national commitment to weatherize at least one million low-income homes each year for the next decade, which can reduce energy usage across the economy and help moderate energy prices for all,” according to Obama’s website.

There are obviously myriad ways green investors can reap benefits from the New Energy for America plan posed by Obama. Venture capital investment in companies working on clean and alternative energy technologies is one way; venture capitalists invested $3.25 billion in clean and alternative energy comapnies in just the first half of this year alone. For smaller investors, or those who would want to minimize their risk through diversification, investing in green funds is an option; dozens of green funds and ETFs have emerged onto the scene in the past couple of years. And with the greening of America, so to speak, set to become even more widespread, there is almost no limit to the ways that investors could make green investments turn into, well, green.


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