08/02/2010 08:19 pm ET Updated May 25, 2011

Killing the Future in Its Cradle

While Washington waits to see just how many wrenches the oil industry can throw into the Democratic Congressional leadership's effort to pass a modest "reform oil drilling, help low-carbon vehicles, and finance jobs and green-home makeovers" bill, the rest of us need to do some serious thinking about the next round. The U.S. is at serious risk of failing to create a clean-energy future.

Such a failure would undermine our nation's future in a way that few defeats -- even on the battlefield -- could do. As long as we are dependent on and addicted to coal and oil, and as long as American families and businesses have no other way to get to work, run their factories, power up their laptops, and light their homes, we  will face a future of steadily escalating, security-destroying threats:

  • Jobs exported by the millions.
  • Foreign policy controlled by our oil suppliers. Hugo Chavez for Secretary of State anyone?
  • Escalating climate disruption.
  • Steadily increasing energy bills and national trade deficits.
  • Accelerating environmental and public health degradation. How many of our waterways must join the Gulf of Mexico and the Kalamazoo River?
It's very bad news that we won't have comprehensive energy and climate legislation by January.

It's worse news why we find ourselves in this situation: Because oil and coal have in recent months been able to leverage their old alliances with manufacturers, utilities, regulators, and ideological reactionaries to block not just cap-and-trade legislation but all kinds of attempts to move forward toward clean energy -- whether in Congress or elsewhere.

The federal banking authorities ganged up with Fannie Mae and Freddie Mac to shut down the right of cities and states to help their citizens fund energy efficiency and renewables as part of their property tax bills. They pulled off this outrageous ploy in spite of the fact that a major study done for the banks showed that homes that met higher energy performance standards had foreclosure rates 11 percent below their less-efficient neighbors.

The Tennessee Valley Authority's wildly popular Generation Partners program, which helped homeowners install clean-energy technology ran out of funding and was shut down for a week, before restarting on a scaled-back basis.

Although renewable energy, for the first time, provided more than 5 percent of our electricity in April, the construction of new wind-power sources in the second quarter of this year fell back to 2007 levels -- only 700 MW.

The next year or two will not be a rehash of the last two. The big question on the table will not be whether we can find a way to make carbon polluters pay their bills -- that's clearly going to have to wait. But we can still, for a number of years, still make enough progress without a price on carbon -- as long as we solve the financing bottlenecks that are choking clean energy.

Coal and oil are established, incumbent industries. They have captive customers, subsidized operations, and access to the cheapest possible capital. Wind, solar, geothermal, and high-energy-performance technologies like zero-emission homes and electric cars are start-ups. Their capital needs are greater. Their capital costs are higher. And their access to capital is more limited.

We need to level the playing field. We're not short of capital to finance the energy revolution. Corporations are sitting on $2 trillion in cash and having a hard time finding credit-worthy, high-return investments. Clean-energy investments have very high returns, and the federal government could use its backstop authority to guarantee high-quality clean-energy loans -- instead of throwing billions at low-quality, high-default nuclear boondoggles.

Even if the corporate sector invested only its excess cash -- the amount it has accumulated over its normal reserves -- it would unleash $360 billion in clean-energy investments, which is roughly the size of the additional stimulus that economists have been begging for. But with federal loan guarantees, the banks could step in and leverage that $360 billion in equity investments into something more like $3.6 trillion in total investment. Generating millions of new jobs then becomes not a pipedream but an almost automatic consequence of a wave of new investment.

Incidentally, this is exactly what China is already doing. You don't need an elaborate, quant-modeled, impossible-to-understand, collateralized debt obligation to make this work -- it's just old-fashioned project finance.

The U.S. can keep up in clean energy, but now that we can see that a price on carbon is a few years away, clean-energy finance should become our first and primary focus.

Unfortunately,  you can be sure that Big Coal and Big Oil will be standing in the way, trying once again to kill the future in its cradle. Will President Obama play Hercules and kill these two serpents before they do?