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Obama's Cabinet: Energy

Concluding the series on Obama's cabinet, Reason Foundation's Shikha Dalmia discusses the best and worst choices Obama could make for Secretary of Energy:

Obama has pledged to move America toward a green energy economy. He markets this idea - on which he plans to spend $150 billion over 10 years - as a public works project that would allegedly create millions of new jobs. The money would supposedly go toward supporting: electric cars; a renewable energy portfolio standard for electricity utilities; and reductions in carbon emissions.

But there is a better way for Obama to promote green energy that doesn't involve breaking the federal bank: A zero subsidy energy policy, something that Carl Pope, former executive director of the Sierra Club, and Ed Crane, president of the CATO Institute, jointly advocated some years ago. Instead of asking taxpayers to subsidize green technologies, such a policy would simply eliminate existing subsidies for coal and oil that supply the vast bulk of American energy. It would also replace existing coal and oil taxes with pollution taxes to internalize emissions that pose actual harm to human health or property. This would create a level playing field in energy markets - whose absence environmentalists have long claimed is responsible for making solar, wind and other green fuels uncompetitive.

There are many names floating for this post but, by and large, Obama should stay away from industry insiders such as Federal Express CEO Fred Smith - whose views tend to be skewed toward their own needs - and crusaders such as former Vice President Al Gore - who are too deeply wedded to massive government interventions to be able to evaluate un-intrusive strategies with an open mind. (As previously noted, Fred Smith would be a great pick as Commerce Secretary, however.)

One of the best candidates for the job would be Daniel Yergin, founder of Cambridge Energy Associates, who was awarded the 1997 United States Energy Award for "lifelong achievements in energy and the promotion of international understanding." He does not fall for the energy cause de-jure of the moment - whether energy independence or the peak-oil crisis. He has cautioned against adopting an overly centralized approach to alternative fuels. "High [energy] prices combined with concerns about energy security and climate change are stimulating the most widespread drive for innovation the energy sector has ever seen," he has noted. It will take time for these investments to yield results and government meddling would be useless at best and counterproductive at worst, he suggests.

Also good would be Republican John Sununu - a fiscal conservative, a social liberal and a civil libertarian - who just lost his re-election bid for the Senate in New Hampshire. He co-sponsored the Clean Air Planning Act which, among some valid air pollution measures, unfortunately also tried to impose a cap-and-trade scheme to decrease carbon dioxide. But by and large, he is sound on energy issues. He supports more domestic fuel exploration - but opposes subsidies for that purpose. And he voted against steeper CAFÉ rules and more hydrogen cars.

Among the acceptable but not great candidates would be Philip Verleger, who was on Jimmy Carter's Council of Economic Advisors. He has a deep understanding of the political economy of oil and energy markets. He has cautioned against imposing price controls on energy markets - but favors a windfall profits tax on energy. Although Obama should avoid executives, one who might be tolerable is John Rowe, CEO of Exelon, a Chicago-based energy company. He is generally market-oriented, but believes ardently that the government should reduce greenhouse gas emissions through something akin to a Marshall Plan to jump-start low carbon fuels (maybe because his company owns the largest nuclear fleet in the country).

Pushing the Apollo Plan for energy is Rep. Jay Insleem, a Washington Democrat, who should be avoided - even though Obama himself is proposing something similar. Essentially, his plan is to put in place a "unified and highly prioritized national program" under which Uncle Sam would offer loan guarantees for the construction of renewable energy facilities, cap-and-trade program to reduce greenhouse gas emission and stronger fuel efficiency measures. In the same category is Michigan Gov. Jennifer Granholm, who raised income taxes Michigan's economy entered a recession with an unemployment rate of 8 percent. Now she is pushing a renewable fuel mandate requiring utilities to produce 10 percent of their electricity from alternative sources - something that will raise energy prices and make Michigan even less competitive. She is precisely the kind of energy secretary the country does not need in a recession.

Any of these candidates would indicate that Obama wants to use this portfolio more for pie-in-the-sky, social engineering schemes rather than actually looking for genuinely workable green fuels capable of meeting the energy needs of the economy.

This the final installment of a three part series. Part one, with picks for Treasury, Education and Transportation, is available here. Part two, with Dalmia's picks for Secretary of State, Defense and Attorney General is here.

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