What are the real goals of Barack Obama's energy plan? The new president entered the White House with three core objectives: combating climate change, reducing US dependence on foreign oil, and building a clean energy future with renewable energy sources. In his first six weeks in office, Obama has moved swiftly to address all three, primarily through a $787 billion economic stimulus package and his first budget proposal -- a "once in a generation" fiscal plan that seeks to radically reorder US policy priorities (EC Feb.27,p2).

In some ways Obama's energy objectives are complementary -- for instance, an expansion of renewable energy sources such as wind, solar, geothermal and biofuels helps reduce foreign oil dependency. However, in others, the goals are contradictory. The president's pledge to "promote the responsible production of oil and gas" would help cut imports, but would undermine his climate goals.

Confounding matters further, the administration cites national and economic security as a leading reason for energy reform. "Because our future depends on our ability to break free from oil that's controlled by foreign dictators, we need to make clean, renewable energy into a profitable kind of energy," Obama said last week after unveiling his budget proposal. "That's why we'll be working with Congress on legislation that places a market-based cap on carbon pollution and drives the production of more renewable energy."

To find Obama's true policy objectives, it's best to look beyond the rhetoric and delve into where the new president plans his biggest investments -- in terms of both dollar outlays and political capital. Two conclusions stand out: Firstly, that tackling climate change is the clear priority, taking precedence in any contradictions. And secondly, Obama plans to tackle foreign oil imports largely on the demand side, with little attention to domestic oil supply. The energy security argument is deployed where convenient; ignored where it is not.

Funding Plan

The recent stimulus package and budget outline confirmed that the top priority clearly is addressing climate change and expanding renewables. The stimulus laid the foundation by assigning some $90 billion to clean energy initiatives, including major incentives for renewable energy producers to double production within three years (EC Feb.20,p2). The budget then added more funds and laid out principles for a cap-and-trade program, including targets to cut US greenhouse gas levels by 14% from 2005 levels by 2020 and 83% by 2050.

With carbon credit prices starting at around $20 per metric ton, the climate program would generate nearly $650 billion from the auction of emissions credits between 2012 and 2019, including nearly $80 billion in its first year, according to Obama's proposal. "That is a huge number. It leaves no doubt that cap-and-trade is the focal point of Obama's energy plans and that he is banking on large revenue streams coming from that program," said one energy lobbyist.

The budget draft says about $80 billion of the climate revenues would help fund Obama's proposed lower- and middle-class tax cut each year beginning in 2012 -- cushioning the expected increase in energy costs from a cap-and-trade program. The government would also spend $15 billion of the funds each year on clean energy technologies, such as wind power, solar power, advanced biofuels, carbon capture and sequestration and more efficient cars and trucks -- making good on Obama's campaign promise to invest $150 billion in "clean tech" over the next 10 years.

The carbon crackdown and investment in renewables would ultimately help address US reliance on foreign oil by eroding demand, but probably not for many years. Renewables play a small role in the US energy mix now and would require substantial new infrastructure. Non-hydroelectric renewable energy accounted for just 4.3% of total US energy consumption in 2007, while fossil fuels made up nearly 85%, according to the US Energy Information Administration. Leading Democrats in Congress are drafting energy legislation that could mandate as much as 25% of US electricity generation to come from renewable sources by 2025.

Obama's early initiatives suggest he will tackle oil imports on the demand side through energy efficiency measures. The recession, along with around $20 billion in stimulus funds for energy efficiency programs, will help here. But most critical will be Obama's push to drive auto fuel economy standards higher, since the transport sector accounts for 70% of US oil consumption.

During the election campaign, Obama said he would consider opening new offshore areas to oil and gas drilling, but that now looks like political pandering. "The belief is that fossil fuels are passe," ConocoPhillips Chief Executive Jim Mulva told a London conference recently. That point was hammered home last week when Obama's budget proposal included over $30 billion in new taxes and lost tax breaks for the oil industry, which would be redistributed to clean energy technologies.

Such punitive measures, along with the push for climate action and efficiency, reinforce the notion that Obama's plan to reduce dependence on foreign oil has morphed into a general goal of cutting reliance on all "dirty" fossil fuels.

Paul Merolli, Washington

Compass Points

• SIGNIFICANCE: All signs point to climate change legislation as the Obama administration's top energy priority. The president cites US dependence on foreign oil as a danger to national security, but this is pursued expediently.

• CONTEXT: Democrats may hold majorities in Congress, but that does not mean Obama's cap-and-trade law is a sure thing. While most Republicans oppose climate legislation on ideological grounds, the debate crosses the aisle. Democrats from coal and oil- and gas-producing states are wary, as are those from big manufacturing states and "deficit hawks."

• NEXT: Congress will debate and vote on the budget in April, so watch that process as a harbinger of broader progress. The bigger fights will come this summer as climate proposals pass through congressional committees (EC Feb.6,p2).

For comprehensive coverage and analysis of US energy policy, visit Energy Intelligence's web portal, Obama Energy Vision.