An Energy Policy for the Twenty-first Century

Sunday, January 30, 2005
Our nation needs to enhance energy security and environmental security. With strong leadership, the United States can adopt policies that accomplish both goals.
Since the 1973–74 energy crisis, the United States has taken many steps to improve energy security. Technological progress, governmental policies, and economic incentives have together greatly constrained growth in oil use, making us less vulnerable to oil shocks. At the same time the U.S. economy continued to grow: In 1973 we used more than 1,400 barrels of oil per million dollars (in 2000 dollars) of gross domestic product; in 2003 that figure was less than half as large. The strategic petroleum reserve provides a shock absorber against disruptions. Natural gas has grown as an alternative to oil, creating additional supply diversity.
But the problem of oil security has returned. World oil demand is again growing rapidly, driven by economic recovery, international development, and, particularly, the rapidly growing Chinese economy. We can expect tight oil markets for decades. Tight oil markets bring higher oil prices. More important, though, tight oil markets bring greater—and thus more damaging—price spikes from oil supply disruptions.
At the same time, oil supply disruptions have become more likely. Thirty percent of world oil is now produced in the volatile Middle East. Worldwide terrorism has increased risk to the oil infrastructure. Attacks on Iraqi oil production/transportation facilities continue. Terrorist attacks in Saudi Arabia have hit the oil system and its workers.
Together these two factors—the increased likelihood of disruptions and the tighter oil markets—bring national security risks.
Energy security will require reducing oil use, hardening soft targets, maintaining the strategic petroleum reserve, and creating economically viable substitutes for crude oil.
Security and vulnerability problems are not limited to oil. If liquified natural gas (LNG) production is concentrated in unstable regions of the world, growing international trade in LNG will create new security problems. American centralized energy systems, supplying large amounts of energy, provide soft targets for terrorist attacks. And U.S. energy systems are vulnerable to inadvertent disruptions, as illustrated by the Northeast power blackout.
Paralleling energy security issues are problems of environmental security. Particularly challenging is the growth of greenhouse gas emissions and the worldwide environmental risks these emissions entail.
During the last 30 years the United States has taken many steps to improve environmental security. We have greatly limited sulfur emissions from electricity generation, thereby reducing risks from acid rain. Criterion pollutants from new automobiles have declined by orders of magnitude; the greatest remaining problems are old, super-polluting vehicles. Air and water quality is improving, reducing risks to human health. Although more progress is feasible and desirable, environmental security has improved significantly.
But one particularly difficult problem remains: atmospheric releases of greenhouse gases. Evidence has become persuasive that growing concentrations of greenhouse gases increase average global temperature, modify rainfall patterns, increase severity of tropical storms, raise ocean levels, sharply disrupt ecosystems, and can be expected to accelerate species extinction. Although greenhouse gases come from many sources, fossil fuel combustion is the prime human-induced source.
Many policy options to improve national security would also improve environmental security—and vice versa. The challenge for the next four years is to implement energy policies that allow plentiful energy at reasonable costs, that enhance energy security, and that reduce atmospheric carbon dioxide releases. Among such policy options, strategies for governmental sponsorship or encouragement of technology development seem particularly attractive.
The Bush administration’s hydrogen initiative—a public sector/private sector initiative to develop technologies for hydrogen-fueled motor vehicles—deserves strong support. Economically attractive hydrogen fuel cell vehicles would allow a shift from petroleum-based motor vehicle fuels to hydrogen fuels. Our nation, and the rest of the world, could turn coal, natural gas, wind—almost any domestic energy source—into automotive fuels, thereby avoiding energy supplies from the unstable Middle East. A hydrogen economy would greatly improve energy security and reverse the upward trend in carbon dioxide emissions. But technology, infrastructure, and institutional barriers are profound, and we cannot be sure of success. The transformation would not be fast but could be possible over the next 50 years.
In addition to the hydrogen initiative, we need a clear vision of aggressive technology strategies to solve the dual problems of energy security and of environmental security and serious resource commitments supporting that vision. We need increased federal budgets for pure research and applied research to create low–carbon dioxide technologies, technologies to increase energy supply from secure sources, and technologies to improve end-use energy efficiency. But federally funded research cannot be the entire answer; the United States needs more private sector initiatives, through corporate research or corporate funding of external research.
Energy efficiency improves energy security and environmental security. Corporate average fuel economy (CAFE) standards for passenger cars and for light-duty trucks need tightening, particularly for SUVs. But simply tightening the standards is not enough: The entire 30-year-old CAFE system is due for reform. Marketable efficiency credits, attribute-based standards, integration of car and truck standards, and recognition of hybrid electric vehicles should all be part of a reformed system. Increased automotive fleet efficiency would enhance energy and environmental security over the next several decades. Attractive energy efficiency improvements are not limited to automobiles. Improvements for appliances, buildings, and industrial processes could all enhance energy and environmental security.
Strengthening and expanding the electrical grid is also important for energy security. Improvements should not be tied to an omnibus energy bill that may remain stalled in Congress. Grid enhancements should include more transmission, advanced control technologies, and improved communication and coordination. We must avoid a repeat of the Northeast power blackout. Such an expansion can help the environment by allowing renewable energy technologies to be integrated into the electric system.
Ever since President Eisenhower appointed a commission to address increasing oil imports, most U.S. presidents have adopted policies for improving energy security and environmental security. My fervent hope is that the Bush administration will give energy security and environmental security a particularly prominent place on its agenda during the next four years.