How Obama Should Spend a Big Green Energy Fund

State of the Union: Joe Biden likes the energy trust idea, John Boehner isn't so sure.

The severe American recession in place when President Obama took office in 2009 allowed him to hit the ground running with stimulus funding that included billions for battery companies and clean energy. He was also able to allocate billions more to companies like Fisker and Tesla, under the $25 billion Advanced Technology Vehicles Manufacturing (ATVM) program enacted under George W. Bush.

Since then, the funding largely dried up. A partisan Congress was unlikely to enact any more big green energy spending programs, and the Solyndra fiasco made the administration gun shy, in the run-up to the election, about allocating any more ATVM funds—nothing’s been given out since 2011 (when the Vehicle Production Group LLC got $50 million to build wheelchair-accessible natural gas vans).

The Bully Pulpit

But that was then. Now Obama’s a lame duck, impatient to get his agenda through a still-reluctant Congress. That will mean using the power of his office to take executive actions, and coming up with new and bipartisan ideas such as the Energy Security Trust Fund (ESTF) he outlined in his State of the Union address.

It’s a good plan, but if it’s not handled well the result will be more Obama funding disasters like Solyndra (bankrupt solar company), A123 (bankrupt battery company), LG Chem (idled battery company with workers playing games on government money) and, probably, Fisker (now a candidate for sale to Chinese companies).

The Fisker Karma isn't looking like a great federal investment these days, and a possible sale to Chinese companies has led to pushback in Congress. (Jim Motavalli photo)

Oil Money Goes Green

Obama’s basic idea is to take revenues accruing to the federal government through leasing public lands for oil and natural gas production and put it into the energy trust. “I propose we use some of our oil and gas revenues to fund an energy security trust that will drive new research and technology to shift our cars and trucks off oil for good,” Obama said. “If a nonpartisan coalition of CEOs and retired generals and admirals can get behind this idea, then so can we. Let’s take their advice and free our families and businesses from the painful spikes in gas prices that we have put up with far too long.”

The trust could get some conservative support, because a surprising number of right-wing think tanks have been embracing the idea of a carbon tax (this is a variation) and there’d be no adding to the deficit. It’s a more politically palatable variation of a plan proposed by Congressman John Larson (C-CT), who wants to impose a tax on the carbon dioxide content of fossil fuels beginning at $15 per metric ton. The burden would fall on oil refineries, coal processing plants and other “points of import,” and though probably effective would immediately make a whole lot of enemies.

How to Spend Billions

OK, let’s assume Obama gets his ESTF. What should he do with it? I’m not keen on the idea of any more $500 million loans or grants to start-up companies. It hasn’t worked all that well, and it’s picking winners when it’s really hard to see where things are going. Should Obama throw another $500 million loan at Tesla to ensure it gets over the ramp-up hump? Should he make a huge bet on hydrogen, subsidizing a much-needed national network of $1 to $2 million hydrogen refueling stations around the country? The whole fund could be eaten up with an effort like that, and its success is far from certain.

And Obama really has to take grants and loans out of politics. For instance, the $2.5 billion he administered for battery manufacturing went disproportionately to Michigan to help that state's ailing economy. It didn't hurt that Michigan then had a very visible Democratic governor. Awards need to be made strictly on merit.

Smart Funding Starts Here

Here are a few better ways to spend the trust fund:

There’s a few good ideas. I don’t think we’d have trouble putting the Energy Security Trust Fund money to productive use.