I caught up with the governor following his testimony before the Senate Environment and Public Works Committee today. After chatting about energy policy (more on this below), I asked him if, given the shrinking pool of potential 2012 candidates, he was considering throwing his hat in the ring. He replied:

I’ve said, when I was chairman of our party in 1993 and [1994], that in the first two years of a Democratic presidency, we need to focus all our attention on those two years — in this case, ‘09 and ‘10. And any Republican who’s thinking about 2012 doesn’t have his eye on the ball. I’ve told thousands of people that, and I’m taking my own advice.

“But you’re not ruling it out?” I followed. At which point he uttered a drawn-out “Uhh” and mumbled something about how he was “just seeing that clock.” Then he took his leave.

He was more loquacious on the topic of cap-and-trade legislation, though, where he had this folksy analogy to offer:

When you grow up in the country, like I did, when you cook a frog, you don’t drop him into hot water, cause he’ll jump out. You drop him into cool water, and then you turn up the heat, and it heats up slowly. And politically, the left has tried to protect themselves by pushing the effects off a few years. Because they know once the job losses start and the higher costs kick in, which they inevitably will, that will be bad for them.

When I asked him if he thought it was necessary to take action to address climate change, he distanced himself from many of his Republican colleagues in the Senate by replying, “I do. I do. I do.”

But he added:

I do not think that the need to address climate change is urgent, that it’s more important than the economy. I’m like most Americans. I don’t think we ought to sink our economy in the name of climate change.

He explained the mysterious math that led to the $646 billion revenue projection from selling allowances over the next ten years and revealed it to be … well, pretty mysterious.

“What we specified in the budget is a cap-and-trade target,” Orszag said. There are a number of paths to reach this target, and the budget team did not get into specifics when creating its projection. “Under any plausible path,” Orszag said, “there is sufficient funding to do the energy efficiency investments” and finance tax credits for low- and middle-income workers, as specified in the budget.

“We are expecting that cap-and-trade will raise at least $600 billion,” he continued, adding that any additional resources would be used to offset higher energy costs for households across the country.

Given the uncertain future of cap-and-trade in the face of heavy Republican opposition, I asked him if the administration was sufficiently confident the policy would be enacted that it felt comfortable tying $15 billion a year in clean energy investments to revenue from cap-and-trade.

His response: “We desperately want and need the energy efficiency improvements … and we think this is the most sensible way of financing those investments along with ‘making work pay.’”

A brief note: The budget outline sets aside $120 billion for “clean energy technologies,” but Orszag continually referred to this provision as a plan for “energy efficiency” improvements/investments. That leaves some uncertainty as to exactly what this funding will be used for. Or maybe the budget man, with dozens of 11-figure numbers floating around in his head, simply misspoke. Overall, though, his comprehensive understanding of all the issues contained in the budget was thoroughly impressive.

In the past year, the Obama campaign has made a lot of promises on energy, related to jobs, climate change, clean energy, gas prices and the list goes on. Now energy analysts, the environmental community and Americans struggling with a failing economy want to know exactly how the new president plans to deliver on these promises.

I was interested to see some of these issues broken down by Guy Caruso, a senior adviser at the Center for Strategic and International Studies who formerly headed up the Energy Information Administration (the agency that does independent analysis for the Dept. of Energy). In an interview with E&E TV, Caruso discussed key points that Obama’s administration will need to keep in mind when tackling energy. Here are some that stood out.

Plummeting oil prices: Gas prices getting below $2.50 is good news for consumers faced with grim economic times, said Caruso. “[I]t’s like a tax cut when the average consumer now fills the car up for $40 instead of $60,” he said, implying that low gas prices will help Obama take on financial problems. But, that assumes Americans will use the same amount of gas that they used over the summer when gas was $4 a gallon. It’s still unclear whether consumer behaviors will change or remain the same, as I reported here.

Offshore drilling: Caruso says there’s no telling what position Obama will ultimately take on this. Obama, who initially opposed offshore drilling, eventually caved and publicly supported lifting the moratorium on drilling in coastal areas. This is exactly the same thing his opponent Sen. John McCain did — although Obama’s support didn’t quite reach the “Drill, Baby, Drill” levels that McCain’s did. Now, environmentalists are hoping Obama will flip-flop again, this time in their favor. Already, Obama Transition Team co-chair John Podesta, has said that the President-elect may reverse an executive order by lame duck President Bush which allows drilling in Utah. However, Caruso says, Obama may continue to support offshore drilling in other domestic areas in order to hold onto certain “bargaining chips.”

Green jobs: Over and over again, Obama has talked about creating 5 million green jobs. “And I think now reality sets in,” Caruso said. “I mean 5 million jobs is a huge number of jobs.” Plus, certain factors which could create green jobs could also eliminate other jobs. For example, Caruso talked about regulatory policies that affect fossil fuel industries. If a carbon tax is implemented, clean energy will gain a competitive advantage and green jobs will open up; but, that could potentially lose jobs for the oil, gas and coal industries.

Renewable Energy: While Caruso didn’t go into too much detail about how the new White House should think about clean energy, he mentioned a couple significant points. First off, the transition from dirty fuels to clean fuels will probably take decades. Obama, like most politicians, said Caruso, don’t like to talk about things in terms of decades. As for his administration’s first 100 days, Caruso suspects that Obama will have trouble getting a renewables-heavy energy package to pass Congress, even with a strong Democratic majority. However, incentives for renewable energy are sure to show up in a financial package, Caruso believes, so environmentalists can at least rest easy on that note.

Senate Leader Harry Reid and House Speaker Nancy Pelosi. (flickr)

In the wake of Tuesday’s elections — which swept a Democrat into the White House and widened the party’s margins in the Senate and the House — it’s tempting to conclude that the Democrats’ legislative challenges just eased, that the days of GOP obstructionism are over and that the party’s congressional leaders will have their way next year on Capitol Hill.

It would also be misleading.

As Democratic leaders shift their energies from electoral politics to policy choices, they’re in for no cakewalk. Internally, the party will probably move toward the center, as many of Tuesday’s congressional gains came in conservative-leaning regions. Republicans, meanwhile, are vowing to unite ideologically to thwart Democratic plans, largely in fear that 2010 could be a repeat of 2008.

Illustration by: Matt Mahurin

Most important, the country is broke. It is using borrowed money to fight two long-running wars and to address the worst economic downturn in 80 years. On Friday, the news got worse. The Labor Dept. reported that roughly 240,000 people lost their jobs in October, pushing the unemployment rate to 6.5 percent, the highest in 14 years.

Still, besides their greater majorities, Democrats have accumulated a good sum of political capital in the wake of the vastly unpopular Bush administration. The problem is that their ambitious priorities don’t come cheap. Proposals to expand health coverage, cut taxes for middle-class workers and revamp the energy industry to produce a greener 21st century would benefit the economy over the long run. But they would cost billions of dollars now. Some economists anticipate a budget deficit near $1 trillion next year even without these items.

So Democratic congressional leaders will have to pick their battles carefully.

“Those are the two 800-pound gorillas (two wars and the economic downturn) that you’ll have to address before you get around to doing many other things,” said Michael L. Mezey, political science professor at DePaul University. “The budget debate is going to be front and center.”

Last week, President-elect Barack Obama laid out his domestic priorities, including sweeping plans for energy and health-care reform. Yet nothing will be possible if the economy continues to tank. On Saturday, Obama urged more government intervention to reinvigorate the economy.

“We need a rescue plan for the middle class that invests in immediate efforts to create jobs and provides relief to families that are watching their paychecks shrink and their life savings disappear,” Obama said.

Democrats want to pump billions into infrastructure projects, unemployment benefits and help for states, many of which face severe budget deficits. Party leaders hope to pass legislation this month, but the Bush administration has opposed any such plan. It’s unclear who will win the partisan battle. Obama, however, has vowed to make an economic-stimulus bill his first priority in January if Congress fails to act this year.

With Democrats having picked up at least six seats in the Senate and 19 in the House, a stimulus plan should pass easily. Yet numbers are not the only factor determining the success of the Democrats’ agenda.

Many newly elected Democrats represent moderate or conservative-leaning districts, and they tend to favor balanced budgets. These Democrats may oppose big-ticket reforms if they require more deficit spending. Membership in the House’s Blue Dog coalition — fiscally conservative Democrats — now stands at 47, but that figure could grow with the arrival of 2009’s freshman class. As federal revenues fall because of the sinking economy, the burden on Congress to find precious dollars without cutting vital services will only get heavier.

Much will also depend on Obama’s working relationship with congressional leaders, particularly House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.). If the new president doesn’t consult Congress on his agenda — the way President Bill Clinton did with his health-care reform in the early 1990s — he could face push-back from his own party.

“It’s a matter of melding their priorities with Obama’s priorities,” Mezey said, referring to Reid and Pelosi. “The question is whether there’s a willingness on both sides to find common ground.”

On many party plans, Obama and congressional leaders are on the same page. Yet sticking points remain.

Take energy issues. Reid, for example, opposes greater reliance on coal as an energy source. Obama has pushed hard for what he calls clean-coal technologies. (Illinois is a large coal producer.)

Obama also wants to increase fuel-efficiency standards for the nation’s automobiles — a goal almost certain to be opposed by Michigan’s powerful Democrats.

Then there’s this paradox: While wider congressional margins should make it easier for Democrats to carry the legislative day, greater numbers also increase the chances of dissension. “It’s always easier to have discipline with a minority party,” Mezey said. “As you widen the tent, it’s going to be very difficult to maintain the same level of unity.”

To help their chances, Democratic leaders have been quick to reach across the aisle. In a news conference Wednesday, Pelosi vowed to work next year “in a strong bipartisan way and with civility in our debate.”

No amount of civility, though, will probably curb the ubiquitous influence of lobbyists, who tend to care much less about party affiliation than who holds power. For example, there has been a strong push among some Democrats to reform the credit card industry. In September, the House passed a bill to do just that. But in the Senate, the legislation remains mired in the banking committee.

The stalemate may be due to the fact that the finance industry is the single greatest contributor to Washington lawmakers regardless of party — a trend that’s not about to change just because more Democrats will be arriving on Capitol Hill in January.

“It’s less partisan than it is the tremendous industry influence treading on a committee,” said Ed Mierzwinski, program director of the U.S. Public Interest Research Group, a consumer advocacy organization.

Republicans, meanwhile, are down but not out. In an Op-Ed in The Washington Post Friday, House Minority Leader John Boehner (R-Ohio) said the GOP is ready to fight the Democrats’ “far-left agenda.”

“This election was neither a referendum in favor of the left’s approach to key issues nor a mandate for big government,” Boehner wrote. “Obama campaigned by masking liberal policies with moderate rhetoric to make his agenda more palatable to voters. Soon he will seek to advance these policies through a Congress that was purchased by liberal special interests such as unions, trial lawyers and radical environmentalists, and he’ll have a fight on his hands when he does so.”

Obama seems to recognize the Herculean task he faces. In his victory speech Tuesday night, the president-elect pointed to the many issues plaguing the country — crumbling infrastructure, rising unemployment, war in Iraq and skyrocketing health-care costs. He asked the nation for its patience and sacrifice as he attempts to tackle them.

“The road ahead will be long,” Obama told the crowd in Grant Park. “Our climb will be steep. We may not get there in one year or even in one term.

“But, America, I have never been more hopeful than I am tonight that we will get there.”

In my reporting for the story, I came across a group called the Energy Action Coalition, which has run a nonpartisan campaign called “Power Vote” this election season. The campaign’s purpose is to galvanize young people to persuade other young people to vote for candidates or ballot referendums that promote clean energy, the creation of more green jobs and efforts to control climate change.

So far, Power Vote says it has secured commitments from 300,000 young people to vote this way.

Missouri, California and Colorado all have ballot initiatives dealing with clean energy. Missouri’s initiative calls for 15 percent of the state’s electricity to come from clean energy by 2021. California’s ballot measure, Proposition 7, requires the state’s utilities to get 20 percent of their electricity from renewable energy sources by 2010. (The proposition has stirred up controversy because many environmentalists oppose it because they consider its wording confusing and worry that it could backfire and retard renewable-energy growth.) And Colorado’s initiative, supported by Gov. Bill Ritter, seeks to end $300 million in tax subsidies for oil and gas companies and use that money for clean-energy projects and college scholarships.

More detailed accounts of these initiatives can be found here.

As I’ll discuss in today’s piece, voters age 18 to 30 view the environment as a higher priority than older voters. If young people turn out in big numbers tomorrow, they could help move energy and environmental issues to center stage.

But green business owners know that they face obstacles. This week, E&ETV looked at some of them in an interview with Natural Resources and Defense Council energy analyst Jim Presswood.

E&ETV’s Monica Trauzzi asked how the financial crisis will affect solar and wind industries. Although some businesses could feel the credit pinch as banks continue to struggle, Presswood said he thinks the rapidly growing solar and wind industries could help pull the economy out of its doldrums, especially as Americans look for alternatives to fossil fuels. The extension of the tax credits means that private investment will still be attracted to clean energy, Pressman added.

Trauzzi also asked how a Democratic-controlled Congress could battle over tax credits for solar and wind power for almost two years yet move quickly to lift a 30-year-old ban on offshore oil drilling.

I expected Presswood to say that the Democrats are a bunch of weanies. Instead, he talked about some of the legislative politics at play — with fights between the Senate and House, Democrats and Republicans and members trying to please commercial interests, including oil and gas companies.

Ultimately, the political game-playing resulted in the lifting of the ban on offshore drilling becoming “must-pass legislation” and the renewable-energy tax credits becoming “a vigorous game of ping pong.”

Presswood believes that alternative energy will receive even more attention in 2009 under a new president, and with that knowledge, green companies can more comfortably focus on growing.

But the credits may not be dead. Senate leaders decided to attach the renewable energy bill that prolongs the credits onto the $700-billion financial bailout package that lawmakers hope to vote on tonight.

This actually makes sense, and not just because it’s the government’s last chance this year to save a booming sector of the economy from an uncertain future. (I’ll have more on just how uncertain that future is in a forthcoming piece.)

It also makes sense because the credits will help save Main Street jobs.  With the financial system ailing, unemployment on the rise and energy prices bouncing up and down, Congress can’t afford to end tax credits that have rapidly stimulated the green economy, according to solar and wind industry experts.

For now, folks in the renewable energy industry will have to keep doing what they’ve been doing all year long — nervously biting their nails as they wait to see what lawmakers do.