How the energy industry can help shape--and not be swamped by--the inevitable changes in energy policy

When Barack Obama is sworn in as the 44th president of the United States and the White House changes hands for the first time in eight years, we can expect significant and dramatic changes in energy policy, especially with Democrats having expanded their majorities in the House and Senate. Energy companies cannot wait for this new reality; waiting to see what happens is too big a risk. The time for action is now.

There is a solid Democratic consensus on this critical issue of energy policy-one focused not only on reducing our country's dependence on Middle Eastern oil, but also on reducing our use of all fossil fuels, through the following key initiatives:

  • A federal investment in alternative energy, including wind, solar, biofuels, and, potentially, clean coal. The purpose of this investment is not just to lessen our use of foreign oil and lower our carbon emissions, but also to jump-start our struggling economy.
  • The passing of various new mandates to raise automotive fuel economy, increase the production of plug-in hybrid vehicles, and establish a national low-carbon fuel standard.
  • Most significantly over the long run, the enactment of an economy-wide cap-and-trade regime to reduce global warming pollution. This will increase the price of burning fossil fuels while creating opportunities for companies and industries that reduce their carbon emissions.

We can expect reasonably timely action on this agenda-probably starting with the green energy investment andwindfall profits tax-both because of the unprecedented Democratic unity that exists today and party leaders' sense of urgency that they must deliver on their promises. Moreover, in the wake of their defeat, the Republican Party will be chastened, in some disarray, and less effective in the opposition.

Adding further fuel to the fire of change, there is good reason to believe that the Obama administration will create a new position of "czar" (or "czarina"), or coordinator, of all policies affecting climate change.

All the Good

In response, what should the energy industry do? I believe that to stay ahead of the change curve, it should immediately embrace a three-track strategy.

First, it should demonstrate that they hear public criticism but also remind the public, policy-makers, and media of all the good they do. Without the energy industry, Americans would be unable to get from point A to point B, power their lights, and heat their homes. Moreover, some energy companies are investing far more in increased efficiency and cleaner technologies than the public is aware of and are often willing to embark on new experiments in the process.

Duke Energy, for instance, recently joined in an innovative partnership with Wal-Mart in Texas to provide wind energy to around 15 percent of the retail giant's Texas stores. Duke is also buying up solar power like it's candy. The company, it seems, is credible when it says, "We said we wanted to lead the way in the development of more renewable energy and we meant it." This story-one of substance, not just vapid PR-needs to be told clearly, credibly, and repeatedly through several different information channels.

Duke is responding to what the public wants, intentionally or unintentionally. Two polls conducted last summer by ABC News and the Pew Research Center both showed overwhelming support for finding new energy sources-at least 60 percent favor it-while 30 percent favor conservation or protecting the environment.

Second, energy companies should take action to defuse and reframe some of the negative public perceptions they face. We've all heard the arguments nailing Big Oil: extreme greed, profiteering, price gouging, and generally just taking advantage of consumers. Gas prices have dropped recently, but history shows they will go back up. And $3-per-gallon gasoline could be the norm again as it was for much of the past three years. The same tarnished image affects King Coal, culprit No. 1 in contributing to greenhouse gas emissions and a dirty planet, or so the conventional wisdom goes.

A few companies are starting to address the industry's perception problem. Chevron's "Will You Join Us?" public education campaign aims to define or re-define its corporate image: We care about conserving energy and here's what you, the consumer, can do with us. Early on, BP took a more aggressive, and successful, approach at identifying the nation's energy problem and positioning itself as part of the solution. One gets the sense, through its ad campaign, that this is not your everyday oil company. (And with regard to traditional oil companies, it's surprising to some that ExxonMobil, the world leader, has not publicly tackled, full force, its negative corporate and industry image. My bet is that will soon change.)

Surf the Wave

Third, the industry should recognize that since a giant wave is coming, it will flatten anyone who stands there and tries to stop it; far better to surf the wave and steer in the direction you want to go.

That suggests the wiser course of action is to sit down at the table with leaders of the new administration and Congress to give a little and get a little. BP's Group Chief Executive Tony Hayward laid out a two-pronged policy framework in a speech last March. He called for "a price for carbon, which fairly reflects the true cost to the climate of greenhouse gas emissions; and an additional system of transitional incentives to accelerate new technology and to drive down its cost faster than would otherwise be the case." Why not try to limit the damage and maximize the opportunities, as Hayward proposes, rather than let others dictate how change will be imposed on you?

The big oil companies should try to emulate the model of oilman T. Boone Pickens, who has become one of the nation's biggest investors in and advocates for wind power. Or follow in the footsteps of Duke Energy, which is investing in carbon sequestration technologies so still-plentiful American coal can be mined and used to generate electricity for the foreseeable future without contributing to climate change.

There is no reason why a move away from oil toward other power sources and alternative energies should mean the demise of America's energy leaders. They have the resources and talent to get a leg up on the competition in the green energy space. And if they do so, there is no good reason why they cannot only survive but thrive in the new environment, no matter the new policies that come out of the new Democratic majority in Washington.

Indeed, under a cap-and-trade regime that dramatically raises the cost of emitting carbon, energy companies will find their profitability and market share increasing.

Change is coming. For the nation's energy industry, the only question is whether change will be its friend or its enemy. By taking action today, it can decide the issue.