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
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
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
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.