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POLICY IMPLICATIONS
Despite the importance of energy in our daily lives and the media attention
that energy and environmental issues generate, the survey results show that
Americans are often misinformed about basic energy issues. We are not running
out of energy. Our “dependence” on foreign energy is not the Achilles’
heel that many would have us believe. The oft-criticized “waste” of
power involved in energy production is inherent in the physics of energy systems.
Nuclear power does not have a deadly history in this country.
Why don’t we know more about energy? Perhaps because, for the most part,
we’ve rarely had to worry about it. As United States secretary of energy
Samuel Bodman remarked in a 2005 speech to the Electric Power Association, “The
energy we use is so constant, so dependable, so reliable, and—in relative
terms—so affordable that consumers not only don’t give it a second
thought, they hardly give it a first one either.”
Energy topics are not easy to contemplate. They can be highly technical and
seem overly complicated. Moreover, energy and environmental issues treat a wide
spectrum of somewhat unrelated topics, ranging from thermodynamics and agriculture
to species protection and underground mining to foreign affairs and religion.
Add to this the fact that in our advanced economy, the vast majority of consumption
is hidden from view, and it’s no wonder that the average consumer is ignorant
of the details of energy production. Consumers have long assumed that flipping
the switch means that the light goes on, but few stop to think about the energy
economy beyond the wall socket that makes it all possible. Given the constancy
and reliability alluded to by Secretary Bodman, there’s little reason that
they should.
Yet, whatever the reason for our ignorance, it is dangerous. The wide disconnect
between what the public believes about energy issues and what is actually true
has already moved our policies in unwise directions:
- We have failed to take needed steps to open energy-rich lands for exploration.
For instance, we believe that oil exploration threatens Alaskan wildlife,
and so we oppose efforts to find untapped reserves there.
- We think that our cities are more polluted than ever and that logging and
development are shrinking our forests, and so we desire more onerous pollution
controls and limits to what we term “sprawl.”
- Our belief that America’s oil use is inherently harmful has led us
to adopt a number of failed policies. In 1980, the Carter administration set
up the Synthetic Fuels Corporation to devise alternatives to crude oil. The
program lost tens of billions of dollars with no success. Policymakers have
also promoted ethanol as a substitute for gasoline, going so far in the 2005
Energy Policy Act as to mandate the use of 7.5 billion gallons of ethanol
in the U.S. energy supply by 2012. This mandate comes on top of the several
billion dollars in subsidies that the federal and state governments provide
to ethanol R&D and production each year, subsidies that have done virtually
nothing to increase ethanol’s share in our energy mix.
- The belief that we are running out of oil, like the belief that we are addicted
to oil, has pushed federal R&D efforts into a number of areas that have
cost taxpayers vast sums of money but failed (as of yet) to yield any tangible
results. The federal government has long invested in creating vehicles to
run on fuels other than gasoline and vehicles far more efficient than current
models. The Clinton administration started the Partnership for a New Generation
of Vehicles (PNGV) to develop vehicles capable of getting 80 miles to the
gallon. That program was replaced by the Bush administration’s similar
FreedomCAR program. President Bush also introduced a multibillion-dollar federal
program to work with automakers and energy companies in developing hydrogen
fuel cell technologies, with the idea of displacing the internal combustion
engine. Meanwhile, the federal government has long mandated Corporate Average
Fuel Economy standards for automotive vehicle fleets. Critics have noted that
these standards have led automakers to produce lighter, less-crashworthy cars.
- Because our policy debate has failed to recognize that the vast majority
of the oil that we consume comes from North America, we have overestimated
the ability of nations such as Iran or Venezuela to use energy as an economic
weapon against us.
- Because we are confident that renewable energy sources are the safest to
produce and use, as well as the friendliest to the environment, many of us
support further research and investment in those sources, while we shy away
from increasing our investment in nuclear energy. Not a single new nuclear
power plant has been ordered and licensed since the Three Mile Island accident
in 1979, largely because of misplaced fears about “unsafe” nuclear
power.
- The current bias that many Americans have against coal and the suspicions
that many harbor about the expansion of nuclear energy threaten to keep millions
of people in Third World nations impoverished as well as to prevent taking
significant steps to deal with greenhouse gas emissions in the developing
world.
- The belief that the twentieth century’s uptick in temperatures is exclusively
the product of mankind’s use of fossil fuels has led us to take steps
that would retard U.S. economic growth while doing little or nothing to deal
with rising greenhouse gas emissions around the globe. The most prominent
example, of course, was the Clinton administration’s signing the Kyoto
Protocol (which the Senate has never ratified; thus, the United States is
not bound by the treaty’s requirements). Many of us agree that the U.S.
should sign the Kyoto Protocol on global climate change because we think that
it would require all countries to cut their greenhouse gas emissions (which,
as we have seen, is not true). Analyses of the treaty have concluded that
it is unlikely to do anything significant to lower global temperatures. The
cost, however, could be quite substantial. A 1998 assessment by the U.S. Energy
Information Administration estimated that meeting Kyoto’s targets “would
cost the U.S. economy between $13 billion and $397 billion in 2010 (1992 dollars),
or between 0.1 percent and 4.2 percent of average gross domestic product (GDP).”[42]
- Despite a consensus about skyrocketing future energy demand, we cling to
the delusion that we can fully meet that demand through conservation and efficiency
measures. The federal and state governments offer a host of conservation and
efficiency programs and tax credits. The Energy Policy Act of 2005, in particular,
contained a number of efficiency and conservation measures, including a provision
lengthening daylight saving time. In addition, the law established tax breaks
for purchase of hybrid vehicles and for the purchase and installation of energy-efficient
appliances. The federal government for years has also promulgated efficiency-standard
mandates for items such as dishwashers, clothes washers and driers, air conditioners,
and even toilets. (A provision in the Energy Policy Act of 1992 mandated that
toilets in new home construction must use 1.6 gallons of water per flush—or
less than half the 3.5 gallons per flush of typical models.) Despite policymakers’
emphasis on conservation and efficiency (in some cases, perhaps, because of
it), Americans’ total energy consumption is rising.
A clear understanding of how energy markets work is a prerequisite to enacting
policies that will ensure continued economic growth and a healthy environment.
With that in mind, our energy and environmental priorities should:
- Recognize that, in the future, we will need more energy supplies, not fewer.
We should seek to maximize production of domestic sources of energy by removing
the moratoriums on energy exploration in Alaska’s Arctic National Wildlife
Refuge (estimated more than 10 billion barrels of recoverable oil) and on
the Outer Continental Shelf (estimated 76 billion barrels of technically recoverable
oil).
- Encourage the renaissance for nuclear power in this country. Specifically,
Congress must pass the legislative fixes to remove the roadblocks to completion
of the Yucca Mountain nuclear waste depository. (The Department of Energy,
for its part, must submit the license application for opening Yucca Mountain
that it has promised since Congress approved moving forward with Yucca Mountain
in 2002.) Moreover, Congress should ensure that the Nuclear Regulatory Commission
has the funding, staff, and resources to process applications to build new
nuclear plants in a reasonable and timely manner. Finally, the federal government
should fully fund the Global Nuclear Energy Partnership and lift the ban on
spent fuel reprocessing instituted by President Carter in 1977.
- Remove the special treatment that the federal government presently showers
on ethanol. In particular, Congress should repeal the mandate to raise to
7.5 billion gallons the share of ethanol and other biofuels in our fuel mix
by 2012. It should eliminate the 51-cent-per-gallon tax credit for domestic
ethanol production and should eliminate the 54-cent-per-gallon tariff on ethanol
that can be produced much more cheaply abroad.
- Continue to pursue research into cleaner coal-based power generation and
gasification technologies, including the $1 billion FutureGEN coal-fueled
prototype plant that will coproduce electricity and hydrogen while preventing
air pollutants and greenhouse gas emissions. Furthermore, policymakers should
instruct the national laboratories to fully investigate the promise of carbon
sequestration.
- Continue research into long-shot but potentially revolutionary energy technologies
such as nuclear fusion (through the international ITER consortium) and hydrogen
fuel cells for automotive systems (through the International Partnership for
a Hydrogen Economy).
- Continue basic federal research and development into hybrid vehicles, particularly
in the areas of advanced battery technologies. Improved batteries will be
the lynchpins for plug-in hybrids, bridging the gap between the automotive
sector and electric power plants.
- Pursue advancements in renewable energy technologies such as wind and solar
power. However, policymakers must keep in mind that these technologies will
continue to produce just a small fraction of the energy that a growing economy
requires. They can help meet our growing demand for energy around the margins
but are unlikely to be able to replace more economical fuel sources and technologies
such as coal, natural gas, oil, and nuclear power. Consequently, policymakers
at the federal and state levels should resist calls to implement renewable
portfolio standards that would only serve to drive up prices for consumers
and provide less reliable supplies of energy.
- Eliminate regulations that hinder boosting refinery capacity. A morass of
Clean Air Act and New Source Review regulations makes refinery expansion costly
and effectively prohibits construction of new refineries. No new refineries
have been built in decades, and the nation’s inadequate refining capacity
has contributed to driving up the price of gasoline. Federal policymakers
must expedite existing refinery regulatory processes and approvals to ensure
that consumers have adequate supplies of gasoline.
- Seek to permit the importation of liquefied natural gas (LNG) by authorizing
construction of receiving terminals. Congress took steps in the right direction
by including provisions in the 2005 Energy Policy Act that gave the federal
government ultimate siting authority for new terminals. The Federal Energy
Regulatory Commission must ensure that it exercises a leadership role that
allows for the permitting and construction of onshore LNG terminals in a manner
consistent with public safety.
- Be wary of taking extreme steps to deal with global warming based on an
incomplete understanding of the role of humans in affecting climate change.
Specifically, legislators and regulators should closely study the hard science
contained in the reports issued by the Intergovernmental Panel on Climate
Change (IPCC), while eschewing the “Summaries for Policymakers”
issued months in advance of the full IPCC reports. The summaries for IPCC
reports are written by a small group of political representatives from a number
of member countries, and in the past they have been known to exaggerate or
fabricate claims and to contradict the data provided by more than 2,000 scientists
involved in the full IPCC process.
Finally, our energy and environmental policies must center on the best proven
mechanism for finding solutions to our future challenges. The process of moving
beyond a petroleum-based economy is happening not because of government targets
or imperial dictates but because that is the direction that free markets appear
to be leading us. Market forces are spurring the electrification of the economy.
Whereas several generations ago, we relied on petroleum for much of our electricity,
today we depend on nuclear power and natural gas for that share, an evolution
shaped by economic realities. Whereas today our transportation sector relies
almost exclusively on oil, tomorrow we can expect to depend to a much larger
degree on electricity and, by extension, coal, uranium, natural gas, and renewable
energy.
For those interested in further and more detailed research, Mark Mills and
Peter Huber’s book The Bottomless Well explains many of the ideas
put forth here. Other ideas are explored in greater depth in articles by Manhattan
Institute scholars and can be accessed at
www.manhattan-institute.org/html/ce.htm.
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