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Here's a tough question: Which major Bush policy initiative is the most stupid, short-sighted, destructive or simply downright evil? Is it the huge tax cut for the rich? The unilateral start of a dangerous new arms race with missile defenses and space weaponry? The likely privatization of Social Security? Or the administration's strategy to produce more oil, coal, nuclear and other non-renewable energy supplies, ignoring both environmental consequences and more rational alternatives?

Why choose? They all make big losers out of the vast majority of Americans (and, in some cases, billions of people elsewhere). President Bush's energy policy, however, stands out in its flagrant disregard of science and engineering know-how. It favors a narrow special interest--the energy industry--at the expense of both the global environment and our long-range economic interests.

Brandishing the specters of utility blackouts in California, natural gas price hikes and
gasoline selling for more than $2 a gallon this summer, Bush is conjuring up an "energy crisis" to promote policies long desired by the industry giants. Bush and Dick Cheney push the idea that we're running out of energy and need to unleash the energy industry to produce more. "Conservation may be a sign of personal virtue," Cheney said, but not the basis "for a sound, comprehensive energy policy."

By "conservation" the administration means to evoke images of Jimmy Carter in his cardigan, turning down the thermostat. This deliberately falsified depiction of the alternatives is crucial for Bush's strategy. The issue isn't individual virtue but technological efficiency--doing the same useful things with less energy. Alternatives to nukes and oil like windpower (which in many places already is a cheaper source of electricity than coal-fired utilities), solar cells or hydrogen fuels are important, but increasing the efficiency with which the nation uses energy is the immediate priority. This would allow the nation's economy to grow without any increase in energy consumption over the coming decades, and at the same time help reduce global warming and make the transition to renewable energy sources more feasible.

The current California electricity shortages and the nationwide natural gas and gasoline price hikes are independent, short-term problems. The energy industry created these difficulties itself by cutting back gas production, refinery construction and––as a result of deregulation in California––new power plant expansion. Low energy prices had discouraged investment, but new capacity should fulfill demand and drive prices back down within a year or so. Even the Bush administration admits that its proposals will do little in the short term to solve any of these problems (and it has rejected using effective price caps to limit price-gouging in California). Most of Bush's supposed solutions, such as drilling in the Arctic National Wildlife Refuge (ANWR), will take effect long after these problems are solved.

America's fundamental energy problem isn't a failure to produce enough energy. It is a market failure––a failure of the energy market to behave according to the textbook model of efficiency. Energy markets don't reflect the true costs of energy. There are hidden subsidies, but, more basically, buyers of energy are able to shift costs elsewhere--most notably onto the general environment.

Yet higher prices haven't spurred an increase in efficiency. Even at current prices, the vaunted free market does not fully develop cheaper efficiency alternatives. Sometimes consumers don't have the information they need. Sometimes individuals or businesses look at the initial cost (usually higher for a newer, efficient machine) rather than the total cost over its useful life. According to energy efficiency guru Amory Lovins, director of research at the Rocky Mountain Institute, the nation has misallocated $1 trillion in capital investments to air condition buildings that could have been designed to be more energy efficient.

But the failure is also political. When there are so many market failures, government should intervene to make markets work more efficiently. For example, Lovins suggests that the government set tough efficiency standards for buildings, charge fees to developers who don't meet the standards, and use those fees to pay rebates to those developers who exceed it. Government should first eliminate public policies that discourage efficiency and then encourage businesses and consumers to take advantage of efficient options. Simply pushing for deregulation and "free market" policies solves none of these problems and can, in fact, make them worse. Electricity deregulation, for example, has wiped out very effective utility programs that promoted more efficient energy usage by customers as a way to forestall building more power plants.

Public policy can cure many market failures. For example, from 1975 to the mid-'80s, federal auto and truck efficiency standards "cut gasoline use by new cars in half, even as safety and performance improved steadily," according to a March report by the Natural Resources Defense Council. But Reagan froze the standards, and in the '90s congressional Republicans blocked new standards. Car fuel economy consequently peaked in 1988, then remained constant (and with the rise of SUVs and other "light trucks," overall light vehicle efficiency has declined). Since light vehicles use two-fifths of the nation's oil, a tiny increase in auto and SUV efficiency--even just requiring all replacement tires to be as efficient as the tires on new cars--would more than replace all the oil available in the ANWR.

Energy efficiency already has made a big difference. Since the 1973 oil crisis, increases in efficiency provided nearly three times more energy than was gained by expanding domestic energy supplies. This increased efficiency cut the national energy bill by $200 billion a year, according to the Rocky Mountain Institute. Matching efficiency standards of Asian and European industrial nations would save another $200 billion a year. And even with existing technologies, far more savings are possible.

Federal subsidies for nuclear power or extractive technologies, like shale oil production, have been costly boondoggles. But tiny expenditures on energy efficiency have paid off handsomely. A new Energy Department report concludes that 20 technologies developed by the federal government in the '90s at a cost of $712 million have already saved $30 billion--with more savings to come. But Bush's budget proposes cutting energy efficiency research by 29 percent, or $180 million.

For instance, while he let several last-minute Clinton appliance efficiency targets stand, Bush cut the new standards for air conditioners by a third--against the advice of the nation's second-largest air conditioner manufacturer. The Energy Department calculates that over 30 years, the tougher air conditioning standard would have saved the nation an entire year's worth of electrical usage.

Over the next 20 years, even a fairly moderate energy efficiency strategy could hold U.S. energy use to its 1997 level, about 20 percent below "business as usual" projections, according to "Scenarios for a Clean Energy Future," a recent study by scientists from five national laboratories. They conclude that direct economic benefits would at least equal the overall cost of such a program. Other benefits are less easily monetized but just as real. Carbon emissions would drop to 1990 levels, or nearly one-third less than "business as usual." This indicates that the Kyoto global warming targets could be met with slightly more vigorous policies. Efficiency gains would also help American businesses more effectively compete for future markets and provide technologies that would permit developing countries to skip over dirty, inefficient stages of economic development. By reducing oil dependence, efficiency gains would improve national security and lessen the nation's vulnerability to energy disruptions and price fluctuations. And by saving money wasted on energy, people could afford other things, thus raising their real standard of living.

Bush's priorities are no surprise. The president, vice president, national security adviser, two cabinet secretaries and at least six top administration officials came from the ranks of the energy industry (not to mention an energy secretary and chief of staff beholden to the auto industry). On top of that, oil and gas industry executives gave more than $20 million to Bush and other Republicans last year (four times what they gave to Democrats). As a "thank you," in January industry officials were invited to draw up a "wish list," as Newsweek described it, that Cheney passed on to his energy task force.

Democrats will put up a fight over drilling in Alaska's wildlife refuge. But they have not promoted an alternative energy strategy that underscores the failures of the market, the need for strong public policy, and the economic and environmental benefits of increased energy efficiency. And the labor movement, despite its talk of a blue-green alliance on global economics, has an uneven energy policy record. The Teamsters have endorsed drilling in ANWR, and a coalition of building trades unions and the Mine Workers vigorously fight policies to prevent global warming.

The public remains committed to protecting the environment, even at a significant economic cost. Yet people need to be made to understand that their real interest in having hot showers and cold beer, as Lovins says, doesn't necessarily require more energy or higher costs.

Wasting money on energy consumption that harms the environment may expand the gross domestic product, but it diminishes the gross domestic well-being. It will also, for a few years at least, fatten the wallets of the energy companies, thanks to their obedient servants in the White House.

 

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