A pathway towards next generation energy
Oct 25, 2010, Vol. 16, No. 06 • By STEVEN F. HAYWARD
With the collapse of cap and trade in the Senate and the prospects dim for a measly renewable-energy mandate for electric utilities in a lame duck session, the dreams and schemes of the climate campaign and energy reformers have hit the wall. As long as oil prices remain moderate and gasoline prices continue to ease off, energy policy is on the back burner again, and the burner has been turned off. The House Republicans’ recent “Pledge to America” makes only passing mention of energy, which is unlikely to be a priority in the next Congress unless it repeals the imminent ban on incandescent light bulbs. The late senator Daniel Patrick Moynihan once derided Bill Clinton’s support for welfare reform as “boob bait for bubbas”; likewise, President Obama’s recent declaration that he would make “piecemeal” energy and climate legislation a priority next year should be understood as “gooey grist for greens” who are furious that the White House didn’t put its weight fully behind cap and trade. More likely the White House and most Hill Democrats never want to hear the phrase “cap and trade” ever again.
One reason energy is about to enter a new epicycle of political neglect is that America does not have an inherent energy problem. We have decades of coal supplies and soaring reserves of natural gas opening new possibilities for diversifying our energy mix. What we do have is a liquid fuels problem—our old friend oil, which is vital for our system of surface transportation. We import 60 percent of our oil, and that figure is likely to increase unless we get serious about more domestic production. But even if we increase domestic oil supplies, we will be affected by turmoil in the oil market. Although the global oil market appears stable for the foreseeable future, the fact that so much of the world’s oil supply is controlled by state-owned companies means oil is susceptible to political manipulation, never mind the nightmare scenario of a general war in the Middle East. Beyond the oil problem, the issue of climate change is not going to go away. Despite the weaknesses of the case for catastrophic global warming, it would be a mistake for responsible political leaders to dismiss any possibility of human-influenced climate change decades ahead.
The problem with seeing a way forward is that existing alternative energy sources such as wind, solar, and biofuels are not only much more expensive than fossil fuels, but also not scalable to meet the energy needs of this country or any other. More nuclear power is fine, but it will do little for our liquid fuels vulnerability. The clichés about “green jobs” are all fluff and no fold, and our massive subsidies and tax credits for “renewable” energy should be thought of as energy Keynesianism. Government energy research programs are making some useful technical progress, but very little seems to get outside the labs to commercial development. Is there a way for government to adopt an energy policy that avoids wasting money on inferior energy sources and unproductive laboratory research and that could gain bipartisan support in today’s bitterly polarized climate? There just might be.
For over a year, an informal working group of conservatives, centrists, and liberals have been meeting regularly in Washington with a view to seeing whether a fresh start can be made on energy innovation. The core group included several of us from the American Enterprise Institute, Mark Muro of the Brookings Institution, and Michael Shellenberger and Ted Nordhaus of the left-leaning Breakthrough Institute, though a wider circle of people from right, left, and center also participated in the process. The group came together initially because of a broad agreement about three points: that cap and trade was a defective idea and unlikely to generate serious energy innovation even if it passed; that the business-as-usual approach of subsidizing existing alternative energy sources was unpromising and wasteful; and that the nation was underinvesting in energy innovation.