Fortune
 by Marc Gunther
December 20 2007: 3:53 AM EST
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Bush's clean energy man

Andy Karsner says the new energy bill will disrupt business - and that's a good thing.

By Marc Gunther, senior writer

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Andy Karsner, the Bush administration's secretary for energy efficiency and renewable energy

(FORTUNE) -- Andy Karsner was in an ebullient mood the other day, and for good reason. Congress had just approved an energy bill, which, despite serious flaws, puts the country on a path that will promote renewable energy, reduce our dependence on oil, dramatically increase energy efficiency and curb the growth in greenhouse gas emissions.

These are all passions of Karsner, a hard-charging entrepreneur who joined the Bush administration early last year, as assistant secretary for energy efficiency and renewable energy. He's been pushing a clean energy agenda ever since, and this bill, which the president signed on Wednesday, takes a big step in that direction.

The new law is "historic in size, scope and time frame," Karsner says. "It's truly unprecedented."

The law will bring about dramatic changes in the auto industry, the building industry and agriculture, among others. It will require new auto fleets to average 35 miles a gallon by 2020 - that's a level that today is met only by super-efficient cars like the Toyota Prius and Honda Civic Hybrid. It will gradually phase out the incandescent light bulb invented by Thomas Edison in the 1880s, as part of a suite of energy efficiency standards that will affect buildings and appliances.

It will provide billions of dollars in loan guarantees for power plants that avoid, sequester or reduce greenhouse gases - in effect, subsidies to accelerate the deployment of nuclear power or so-called clean coal technology. That's controversial, of course, as is an enormous mandate for biofuels that will drive up production of ethanol and so-called next-generation biofuels.

Karsner would have written the bill differently, he told Fortune. He has supported tax credits for the solar and wind power industries - they were eliminated from the legislation, because they were linked to revenues that would have come from repealing of oil-industry tax credits. He also has some doubts about the biofuels mandate, which is massive.

But Karsner calls the need for clean energy "the moral imperative of our time" and says federal action is required to develop a long-term, national energy strategy that will stimulate the market forces needed to drive change.

"We need disruptive organizational and institutional change," he says, "...in order to ultimately evolve disruptive technologies at a rate and in a time frame that matters."

Karsner is pleased with the law for another reason. It's an encouraging example of how bipartisan coalitions can, every now and then, get big things done in Washington. No one is entirely happy with the law, which emerged after months of lobbying and legislative wrangling, but it eventually won praise from corporate groups like the Business Roundtable and from environmentalists. "This bill is a clean break with the failed energy policies of the past and puts us on the path toward a cleaner, greener energy future," said Carl Pope, director of the Sierra Club.

In his short time in Washington, Karsner, who is 40, has championed an approach to energy issues that gets beyond the tired arguments between Republicans and Democrats, between businesses and green groups, between those who want more production and supply and others who favor conservation.

He's a Republican, of course, but one with a long commitment to renewable energy and to the developing world. The son of a career Air Force officer, Karsner went to graduate school in Hong Kong, lived overseas for more than a decade, and helped develop such energy projects as a wind farm in Morocco and a power plant in Pakistan. He visited Antarctica on his honeymoon, and will head back soon to promote wind and solar power, as well as efficiency improvements at the U.S. scientific installations there.

As a business guy, Karsner has thought a lot about the proper role of government in the energy economy. "What is the appropriate touch of government for the maximum yield and outcome?" he asks. It makes sense, he says, for his division of the energy department - which will spend about $1.7 billion this year - to make grants to accelerate clean technology. Funds for research, development and commercialization of biofuels and solar power have grown dramatically under his watch. He's also invited entrepreneurs to spend time at the government's energy labs, to seek out commercial applications.

But Karsner does not think the government should place major bets on any single clean energy technology. "The broader you are on technology alternatives, the better off you will be," he says.

That is, potentially, a problem with the biofuels mandate in the energy bill, which will double the use of corn-based ethanol and require massive deployment of unproven next-generation biofuels. (A new report from the World Resources Institute, called Plants at the Pump, highlights some drawbacks with biofuels.) Karsner would have preferred a more open-ended mandate for "alternative" transportation fuels that could have been applied to electric cars as well as to biofuels.

Still, given the difficulty of getting anything big done in Washington these days, the energy bill has to be counted as a triumph - whether you care about energy security, squeezing waste out of the economy or global warming. To top of page

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