Obama to go green, but push could be costly

WASHINGTON (Reuters) - The green revolution has ground to a halt with the collapse in oil prices, right?

Don't bet on it if Barack Obama makes it to the White House with an agenda to create jobs while weaning the country off foreign oil.

With the oil price at about half of its former record-breaking self and the government heading toward a trillion dollar budget deficit by some estimates, there has been speculation that going green would prove too expensive. Obama also said in a September TV debate that some energy initiatives might have to go due to the budget squeeze.

But with the tail wind of commanding support in the polls, the green economy is regaining a new emphasis with Obama, although such an initiative could prove costly for taxpayers.

Obama told Time Magazine this month that with the economy flagging he wanted to launch an "Apollo project" to build an alternative energy economy.

Because "there is no better potential driver that pervades all aspects of our economy than a new energy economy ... That's going to be my No. 1 priority when I get into office."

And in his "closing argument" ahead of next Tuesday's election, Obama told an Ohio rally that his energy plan would create jobs while freeing America from Middle Eastern oil.

"And I will invest $15 billion a year in renewable sources of energy to create five million new energy jobs over the next decade - jobs that pay well and can't be outsourced; jobs building solar panels and wind turbines and a new electricity grid..." he said.

Environmentalists and analysts believe that despite dicey economics, Obama will press ahead on the green front for a few compelling reasons. Green technology could help revive a floundering economy, help pare the habit of importing 10 million barrels a day and ease the country's greenhouse gases.

"We are not just facing an economic crisis unseen since the Great Depression; we are also facing a climate crisis, which we have never before seen in history. We must respond to both," said Gernot Wagner, economist with the Environmental Defense Fund in New York.

Republican John McCain, should he be elected the next president, is also seen as committed to green energy, though he hasn't placed as much emphasis in campaign speeches and is also known more for his "Drill her, drill now," mantra.

Vice presidential candidate Sarah Palin said on Wednesday a drop in oil prices should not dissuade the United States from seeking greater energy independence.

David Pumphrey, Deputy Director of an energy program at the Center for Strategic and International Studies, believes Obama will be driven by the perceived peril of climate change and the need to spur the economy.

"That has been a consistent theme throughout that as you bring on these new technologies there are jobs that go with them and that is the rationalization," said Pumphrey.

To be sure, some analysts think that after the $700 billion bank bailout, the government will be cash strapped, especially if a recession begins cutting tax receipts.

As well subsidizing an industry that doesn't have the capacity to raise private equity due to the collapse in markets could prove costly.

"But the reality is when oil prices fall and consumption falls and taxes falls, then subsidizing wind power becomes proportionately even more expensive. It' a big line item," said Kevin Book. Senior Analyst Energy Policy for Friedman, Billings, Ramsey and Co. Inc.

One way Washington could raise funds is through a carbon tax or by raising funds a system where the amount of carbon is capped and industry must pay for their right to pollute.

The Obama campaign Web site said its administration plans to reduce greenhouse gas emissions by 80 percent by 2050.

"The Obama-Biden cap-and-trade policy will require all pollution credits to be auctioned, and proceeds will go to investments in a clean energy future, habitat protections, and rebates and other transition relief for families." it said.

Analyst Book said the government could raise $600 billion over 10 years by taxing carbon at $10 a ton and raising it by 5 percent a year.

"That $600 billion will go a long way for buying stuff and it's four times as much stuff as Obama has talked about buying. So I don't know how much they are going to focus on the green economy but I do know they are going to look at environmentalism as a driver to taxation, because they have to."

(Additional reporting by Ayesha Rascoe; Editing by John Picinich)