A Comprehensive Energy Plan ~ Thinking Out of the Box

We must tighten our belts – we must evolve both socially and economically if we are going to survive.

One of the most serious limitations of economics, as every teacher of the subject is aware, is that the study defaults to using money as its bottom-line measure and storehouse of value. We can’t easily factor-in quality-of-life, happiness, or the environment and other so-called subjective considerations. It’s not that we can’t. It’s just that we find it easier to stick with dollars, pesos, renminbi, euros and yen. For these we have exchange rates, and it is for these that investors clamber. But how many Chinese renminbi is the life of a single child worth having succumbed to arsenism, fluorosis, or any number of respiratory illnesses that result from the combustion of low-grade coal? Who will compen- sate the family for this loss?

These questions are almost like asking how many angels can dance on the head of a pin. We may not be able to know, but we must be able to decide if the world as we know it will long survive.

All Presidents since Richard Nixon and the oil crisis of the 1970s have included energy considerations in administration policies. Nixon gave us the National Maximum Speed Limitof 55 mph. Carter deregulated domestic oil production and gave us the Federal Department of Energy, then pushed Congress to increase Corporate Average Fuel Economy (CAFÉ) standards. In 1978, the United States Strategic Petroleum Reserve was created and the National Energy Act was introduced. Ronald Regan, in 1983, pushing for more nuclear energy, attempted to get government out of the energy business by merging the Department of Energy with the Commerce Department, which Congress refused to go along with. He was, however, able to get Congress to approve initial steps in building the Yucca Mountain Nuclear Waste Storage Facility on Federal lands in Nevada. George H. W. Bush put together an impressive international force to drive Saddam Hussein out of Kuwait in 1990 – 91 and his son, George W. Bush, took us back to Iraq in 2003. Now, while one will still get some argument over this, most Americans are convinced today, as are the Iraqis, that Operations Desert Storm and Iraqi Freedom had/have more to do with the oil found in Kuwait and Iraq than they did with the freedom of Kuwaitis or with Weapons of Mass Destruction (WMD). What did Bill Clinton do for us? Overruling Treasury Department Antitrust concerns, his administration approved the merger of Exxon and Mobile oil companies, making it the single largest private corporation in the world at that time.

Why has so much of our energy policy emphasis been on oil? It’s because the United States gets approximately 80% of its energy from fossil fuels, and 17% of this is from oil, two-thirds of which is imported. In coal and natural gas, we are self-sufficient, but it’s not economically feasible to fuel cars, trucks and airplanes with coal and natural gas. That’s why most of the oil we use is consumed by the transportation sector.

Americans, who constitute less than 5% of the world’s population, consume 26% of the world’s energy. We account for about 25% of the world’s petroleum consumption, while producing only 6% of the world’s annual supply. So… increase U.S. oil production, right? Wrong, we have only 3% of the world’s known reserves. Even with ANWR and other coastal areas opened to drilling, we would still be dependent on foreign sources to sustain our current life styles.

A new, comprehensive energy policy is needed, one that has two goals:  1) the reduction/elimination of dependency on foreign sources of oil, especially sources other than North American, and; 2) avoidance of environmental calamity owing to Global Warming, a calamity the vast preponderance of climate scientists in the world are predicting. You’ve heard enough about this already and you’re either convinced this threat is real or you’re not. But I am convinced, and I am very much afraid for the future of mankind.  According to Dr. James Hansen, head of the NASAA Goddard Institute for Space Studies and the father of climate change research at that agency, we must reduce our atmospheric concen- tration of CO2 from its current 385 ppm (particles per million) to 350 ppm or less to avert disaster in our lifetimes. That means cutting way back on our consumption of fossil fuels, especially dirty coal and petroleum.

If we do not change our consumption habits, world demand for energy from all current sources will only increase as our populations grow and emerging economies become more affluent from free trade. Therefore, a comprehensive national policy will not be enough to address the second goal, that of avoiding a global warming catastrophe, which, in the long run, truly is the bigger problem. Accordingly, our new comprehensive energy policy must be coordinated with the rest of the world. This means returning to the negotiating table – revisiting the Kyoto Accords, which we could never satisfy now, or hammering out a more demanding protocol as part of a successor accord. For the U.S., this might mean committing to a 40% reduction in CO2 emissions by 2020 and an 80% reduction by 2050 as our “fair” share of the contri- bution. Can we afford to do this? Can we afford not to do this?

Pay me now or pay me later.

How do we get there? Well, I’m sorry folks – but policies aimed at bringing down the price of gasoline and other fuels so that we can continue on the same path we’ve been on since the end of WWII address neither goal of a “comprehensive” energy policy. They won’t make us any safer and they sure won’t make us any healthier. We must tighten our belts – we must evolve both socially and economically if we are going to survive.

Not indifference to Senator McCain’s thoughts on energy policy announced last week, here are my recommendation for the next administration to pursue with the American people through their representatives in Congress. First, convene a bipartisan panel for “long-term” energy policy that includes energy, environmental and economic experts who are not representatives of energy industries’ profit interests. Energy policy this time around should be motivated by the moral equivalency of survival rather than profit. Second, leave nothing off the table for consideration… nothing, not new nuclear power plants, not carbon cap ‘n trade regulations, not conservation or moratoriums on new coal-fired electric plants, not the drilling in ANWR and new coastal areas, and not even nationalization of energy production or considerations of eminent domain. Too much is at stake here: national survival — nay, even the survival of our civilization.

This new energy panel might consider the following: 

1. new tax subsidies for urban area mass transit systems and the expansion of interstate, rapid rail transportation systems;

2. Federally-funded alternative energy research with a national goal such as that established by President Kennedy in 1961 to put a man on the moon (industry seems to be more interested in exploiting current geo-political circumstances and lobbying Congress so that they can produce more oil for profit than in seriously considering alternatives);

3. backing-off subsidies for bio-fuels until technologies are available at a sufficient scale to make the production of ethanol and other bio-fuels from non-food sources practical;

4. the regulation or nationalization of energy and transpor- tation industries seeking cost containment and efficiencies (I know, I know, this smacks of socialism, but these things are working for other, mostly-market economies like our European and industrialized Asian friends);

5. tax incentives to help people transition from gas-guzzlers to hybrid and electric cars as they become more widely available, and the acceleration/expansion of CAFÉ requirements for new vehicles to discourage both production and demand for energy- wasting vehicles (certainly, pickup trucks and SUVs should not be excused from the same mileage and environmental standards as sedans);

6. “New Deal” style government work programs and tax incentives to insulate older homes, replace outdated, energy-hog appliances, and install decentralized, renewable energy sources such as wind generators and solar panels.

It is my personal belief that nothing short of an “all-court” press is going to salvage the energy situation that we find ourselves in today. This means that we’re all going to have to get on the same team, because the opposition is not China or OPEC. The opposition isn’t even al Qaeda. The opposition is inertia (resistance to change) and greed.

I invite your comments, pro or con, and would be very much interested in hearing of any ideas to expand my list for the next administration to consider (I don’t have all the answers; nobody does).

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Published in: on June 30, 2008 at 12:00 pm  Comments (3)  

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  1. You have put in some hard hours on this one, Opa. For three days this past week we loaned our huge country yard to family and friends to hold a junk sale. With nothing to do I listened to everyone talk about the cost of fuel, the presidential election and the economy in general. These were mostly older adults who have lived through hard times as many were not educated and have spent their life at manual labor. They have the mindset that Social Security was to be their retirement and now they do not have enough money to pay their bills. If these people represent a large number of Americans then we are in some real trouble. There is not enough social programs to bail them out of the mess they have got themselves into. Most are my age (near 70) or older and they have not saved any money and are still in debt for homes they could not afford in the first place. It really made me think of the younger generation that buys anything they can put on a charge card or get a loan for with no idea of the interest they are paying. Add the high cost of fuel to an already unbalanced budget and these people are really in trouble.

    I wish I had the answer.

    Do know that schools need more teachers like Kent Garry who understands economics and who teaches it in the classroom.

  2. Opa, I am very appreciative of the work, both in thought and research that went into writing this blog! It proves that there isn’t a one-course of action, short-term fix to our problem. Albert Einstein once said that “you can’t solve a problem with the same level of thinking that created it.” So, if we as Americans want things to be different in the future, we as Americans have to be willing to make different choices.

    We as individuals can start by being willing to quit having this conversation in terms of “partisan politics” and to start having a conversation where we question why aren’t more of the points you raised being discussed and debated on a holistic approach. We have all heard comments from others who have said “Well, if the republicans/democrats (pick the one you are most comfortable blaming) would just do “X” (insert your own simple one-topic solution), then we would see our gas prices go down! You have helped us see that this particular line of reason just isn’t reasonable! If we don’t start having this conversation on a much broader perspective with others to change “the level of thinking that got us to this point” and start demanding a much-broader, non-partisan conversation to occur on a national level, we will continue to be victims of “unintended” consequences (such higher grocery costs resulting from the implementation of corn-based ethanol) and $4.00+ per gallon of gasoline with no real solution of any kind on the horizon.

    I appreciate you framing for your readers what issues could be considered in a comprehensive energy policy. Given the importance of this issue to all of our collective futures, I plan to use the points you have outlined as a basis to begin to evaluate what each of the presidential candidates have to say or in some cases don’t say about the need for and development of a comprehensive energy policy. Thanks for helping me with my “presidential candidate energy policy evaluation form”!

  3. Hey Opa,

    I certainly agree with you that the time for environmental and energy policy action is now. I’ve been reflecting on this issue a long time. You know, we drive a hybrid, have our own garden, ride the bike to work whenever possible and try to conserve energy by leaving a smaller energy footprint.

    Individual action is good, but the human stresses on the Earth’s environment just keep getting bigger. And some solutions (like energy production at home where it is utilized) is not affordable for most people.

    At all events, I was thinking and writing about the issue over the Fourth of July.

    The result is the following paper. I would appreciate your comments. Feel free to use this paper if you have an appropriate application.

    Carey Sutton

    DECLARATION OF AMERICAN ENERGY INDEPENDENCE
    July 4, 2008

    The United States of America is engaged in a battle to create and sustain affordable energy independence, remain as the World’s #1 Economic Superpower in an era of intense Global Economic competition, and create a clean and sustainable environment.

    To win this battle, America’s 21st Century Energy Policy must be modeled after our success in mobilizing production during World War II. In the face of daunting challenges, Americans made great sacrifices in order to produce and deliver airplanes, warships, tanks, trucks, munitions and human resources on a nearly unimaginable scale – starting almost from scratch. That kind of focused commitment to fight and to supercharge our wartime industrial production was necessary win World War II and protect our way of life.

    To prevail in our battle for energy independence, Americans must invest heavily in American Energy technologies and infrastructure over the next 10 years in order to attain the following objectives:

    1. Return America to Affordable Energy Independence – focused on clean and renewable energy solutions.

    2. Produce enough electrical energy from a combination of Centralized Energy Plants and Local and Renewable Energy Production to satisfy all home and automobile electrical power demand.

    3. Rebuild and reinforce the Electrical Power Grid to handle much greater electricity demand.

    4. Put millions of people to work in Clean-Tech industries for the next 10 years designing, manufacturing and installing America’s 21st Century Energy infrastructure.

    5. Enable America to convert to clean electric cars within 10 years and rebuild the American Auto Industry into a competitive International force that sells energy efficient American cars at home and abroad.

    6. Reverse our balance of payments deficit by becoming the World’s top Energy technology exporter instead of the top energy importer.

    7. Enhance geopolitical stability and reduce Middle Eastern terrorism by minimizing our interest and influence with respect to Middle Eastern Oil.

    8. Extend America’s petroleum supply.

    9. Remain as the World’s #1 Economic Superpower in an era of intense Global Economic competition.

    How do we do this? The Federal Government must invest heavily over the next ten years to design the following 21st Century Energy Technologies and build the following American Energy Infrastructure:

    1. Double the nation’s Centralized energy production capacity using traditional energy sources such as coal, hydroelectric and nuclear. We will invest $100 Billion each year over the next 10 years – $1 Trillion total investment.

    2. Quadruple America’s Centralized clean and renewable energy resources, such as wind, solar and biomass. We will invest $100 Billion each year over the next 10 years – $1 Trillion total investment.

    3. Rebuild and double the capacity of America’s energy power grid. We will invest $100 Billion each year over the next 10 years – $1 Trillion total investment.

    4. Design, manufacture and install every decentralized energy option that will produce electrical power AT home and work. We need to focus on Local Energy Production through solar, wind and biomass to supplement centralized power and create clean and renewable power that is produced where it is consumed – at the home and at the car. Decentralization of power production is necessary to relieve stress on the power grid as we move toward clean and renewable electrical energy for homes and automobiles.

    The cost of decentralized energy implementation will be financed through government loans. We will invest $50 Billion each year over the next 10 years – $500 Billion total investment to pay 1/3 of the cost as a down payment for U. S. government insured Energy loan to the consumers. This down payment will provide security for the lender’s investment. The cost of local energy production will be repaid by the consumer through monthly payments to the Federal Government for the down payment and to the government backed lenders in an amount that does not exceed 66% of the consumer’s energy cost savings.

    5. Fund American Automobile Manufacturers to create Wartime-Style design and production facilities to design and build the world’s most technologically advanced and energy efficient cars that run primarily or exclusively on Electricity. We will invest $100 Billion each year over the next 10 years – $1 Trillion total investment. We will recoup 100% of this investment through a profit sharing plan with Auto Manufacturers over first 10 years.

    6. Enhance and expand energy efficient public transportation such as light rail. We will invest $100 Billion each year over the next 10 years – $1 Trillion total investment.

    7. Create and operate an Energy Technology Venture Capital Investment Fund for high technology Energy Innovation that develops cutting-edge energy technologies and solutions – America must create and become an exporter of Energy Technology instead on an Importer of Energy (oil). We will invest $50B each year over the next 10 years – $500 Billion total investment. We will earn a 400% return on this investment over the next ten years.

    8. Educate people to utilize and conserve energy in the same way that nearly all Americans pulled together and sacrificed during World War II. Examples – locally produce your own energy in every possible way. Consume less energy. Make a smaller energy footprint. Drive an electric car. Utilize Public Transportation. Grow some of your own fruit and vegetables.

    9. Request and encourage Able Bodied Americans to contribute at least five hours every week in Green activities such as weatherizing homes, building light rail lines, installing solar panels or local windmills, and applying their unique skills to the task of Energy Independence.

    The total cost of these investments in our 21st Century Energy technology and infrastructure will be $6 Trillion – roughly 4% of our Gross Domestic Product during the next 10 years. However, the net cost of American Energy Independence is relatively small because these Energy programs will generate $4.7 Trillion in revenue over next 10 years. Specifically, we will earn $2 Trillion in profits from our investment in Energy technology companies, $300 billion from consumer payments that result from energy savings, $1.4 trillion in additional tax revenues from higher employment and manufacturing, and $1 Trillion in profit sharing from our investment in 21st Century Auto Manufacturing.

    Accordingly, the net cost of these investments will be just $1.3 trillion – roughly 1% of our GDP during the next ten years. At all events, our investment in American Energy technologies and infrastructure over the next 10 years will continue to provide massive return on our investment for hundreds of years and create a cleaner and sustainable environment.

    SUMMARY:

    It has often been said that “Greatest Generation” was the generation of Americans that won World War II. That may be true.

    Perhaps the greatest generation was really the generation of Americans that won our independence and created the United States of America.

    However, our generation has the challenge and the opportunity to create and sustain affordable energy independence and remain the World’s #1 Economic Superpower in an era of intense Global Economic competition.

    Our generation has the challenge and the opportunity to reduce geo-political tensions and reduce terrorism that are too often caused by America’s reliance on Middle Eastern Oil.

    Our generation has the challenge and the opportunity to create a cleaner and sustainable environment for us and for future generations.

    Our generation of Americans must marshal all of our resources and work together to meet the daunting energy, environmental and geo-political challenges that we face today.

    Our generation can declare and fight for energy independence and become the Greatest Generation.

    Carey Sutton
    July 4, 2008


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