Tuesday, December 2, 2008

The Way Forward on Energy

Last week in "The Falling Price of Oil," I discussed the fall-off in prices, which I argued does not invalidate the concerns about energy production and use that got a new hearing as a result of the 2003-08 price shock.

Any attempt to deal with those problems will have to follow three broad avenues.

1. An across-the-board pursuit of energy efficiency. Small sacrifices on the part of individuals (like turning off the lights when they leave the room) do no harm, but are also not enough. "Lifestyle" changes can be very ephemeral, and in any case generate only limited savings. Rather the emphasis should be on the technology defining those small choices, which can provide more robust, structural, lasting savings. Zero-energy housing and the modernization of electric grids, for instance, offer significant possibilities. So does a turn to alternative forms of transport and communications, like new car concepts, or the widened use of telecommuting. Those efficiencies will make demand easier to meet with shorter oil supplies, and still-developing alternatives.

2. The reduction of the use of fossil fuels in electricity production, an area where alternatives are relatively well developed, and still have considerable potential. Despite chronic underinvestment, particularly from the 1980s on, wind and solar are an increasingly practical way of meeting a large part of the energy needs of even advanced societies (as Denmark, Germany, Spain and others are demonstrating).

3. A shift of the energy base of our transport system away from fossil fuels, to alternatives, a more problematic thing than simply producing electricity from alternatives. Hydrogen, at least, when produced through electrolysis, is not an energy source but an energy carrier, dependent on a massive increase of electrical production (and the same goes for a shift to electric cars). The economics of very large-scale ethanol production remain to be proven, especially given anticipated pressure on agricultural production as a result of global warming; the salination and waterlogging of irrigated land; and population growth in the coming decades. However, it seems there is at least enough wriggle room for some mix of these to produce a partial solution.

Unconventional oil and nuclear energy may have their part to play, too, but oil, and nuclear energy (at least so long as this is provided by Generation III atomic reactors) should be seen as highly problematic stopgaps rather than permanent fixes. (And in any event oil, unconventional and otherwise, is also needed for non-energy purposes like the production plastics, pharmaceuticals and fertilizers, at least until commercially viable substitutes can be found.)

Furthermore, it is an indulgence in market romanticism to think the private sector can do this all by itself, or even take the lead. The post-1973 era has been one of slow growth and rampant "short-termism," a business climate which is far from conducive to the kind of investment that rebuilding the world's energy base requires.

Besides, it is worth recalling that the current place of fossil fuels and nuclear energy was built on massive energy subsidies-over $600 billion since 1950 in today's dollars according to one study, and perhaps far more than that.1 Those who want to let the market solve the issue simply ignore the ways in which the playing field has been, and continues to be, unfairly tilted in favor of established and politically influential energy producers.

They also neglect the fact that even if oil has benefited from a "fantastic favoritism" (as John Kenneth Galbraith put it in The Liberal Hour) in the degree of such support it has received, the fact of government support for rising industries is not at all exceptional. One does not have to probe very deeply to find major subsidies in the background of every technological revolution in American history, from the railroads, to aerospace, to computing (much as it may irk the libertarian-conservative ideologues who have come to dominate economic debate). And there is no denying that renewable energy has never received anything close to such support, not only in the U.S., but even in other countries more favorable to them, like Germany, the underinvestment in renewables at every level from R & D on being an international problem as scholars Daniel Kammen and Robert Margolis have pointed out.2

Indeed, given the time scale involved in making the transition (and the added pressure climate change is placing to speed things along), I suspect it will take more than properly targeted subsidies to achieve a "green" economy in a timely way, even in the relatively limited form of a shift to other energy sources. Calls for anything resembling public planning remain unfashionable, but nonetheless, to the end of making substantial, rapid progress, goals must be set and met. Sweden has declared a commitment to a fossil fuel free economy by 2020. This may prove overambitious, but considerable progress is not, and even if the U.S. (larger and less politically cohesive) may not be able to match it, it is something to aspire after nonetheless. Indeed, the differences among countries (particularly the much more profound ones between developed and developing economies) warrant not only national policies, but international collaboration and cooperation on a scale not yet seen.

1 Robert H. Bezdek and Robert M. Wendling, "The U.S. Energy Subsidy Scorecard," Issues in Science and Technology 22.3 (Spring 2006). Bezdek and Wendling estimate that of $644 billion in total Federal energy subsidies from 1950 to 2003, $63 billion went to nuclear energy. However, direct subsidies have been estimated at $115 billion for the 1947-1999 period, with another $145 billion in indirect ones for the same years-$260 billion in all, before adjustment for inflation, or nearly 4-5 times as much as in the Bezdek and Wendling estimate. See Alexander Likhotal and Jean-Michel Cousteau, "Are We Asking the Right Questions?" The Green Cross Optimist (Spring 2006), p. 1. U.S. military expenditures on securing the Persian Gulf, if viewed as an oil subsidy, would by themselves explode the figures given above, raising the figure into the trillions. See Michael Klare's Resource Wars: The New Landscape of Global Conflict (New York: Holt, 2002) and Blood and Oil: The Dangers and Consequences of America's Growing Dependency on Imported Petroleum (New York: Holt, 2005).
2 See Robert M. Margolis and Daniel M. Kammen, "Underinvestment: The Energy Technology and R & D Policy Challenge," Science 285 (Jul. 1999), pp. 690-692; Margolis and Kammen, "Energy R & D Innovation: Challenges and Opportunities for Technology and Climate Policy," in Stephen Schneider, Armin Rosencranz, and John-O Niles, eds., A Reader in Climate Change Policy (Washington D.C.: Island Press, 2001).

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