In the late 1970s, Jimmy Carter’s energy policy came to be summed up by an article of clothing: a cardigan sweater. More recently, we’ve been told that we are “addicted to oil” and that we need to “drill, baby, drill.” President Obama’s first State of the Union address seemingly melded them all together.
The reality is that our energy policy-making efforts remain at best a Goldilocks approach. Think of the character from the children’s story sampling all of the bears’ porridge. Like Goldilocks, we tend to pay too little or too much attention to different issues that make up a comprehensive energy policy. But unlike Goldilocks, we can never get it “just right.”
What are the key elements and how can we get it “just right”? How can we simultaneously unleash the energy potential of the United States and satisfy our desire to transition to an energy system based on a more sustainable and climate friendly model?
A “just right” approach does not count on silver bullets, and also rejects the false choice between too little and too much of any one source. Such a policy counts four broad elements: energy efficiency and conservation, investing in the entire energy chain, managing carbon expectations, and fostering private investment and free markets.
Any serious energy policy prescription must begin with efficiency and conservation. They are the most immediate and cost-effective sources of “new” energy, with the added bonus of having no greenhouse gas emissions. Countless research has shown that efficiency standards are the cheapest way to reduce fossil fuel consumption.
There are clearly challenges for this first critical piece. But it remains the area where we should begin our focused, coordinated efforts. Government, the private sector, and consumers all have key roles to play. We must cultivate a culture of energy-savers across our nation. And we need to be creative in how we approach efficiency.
As serious as we need be about conservation, so must it be for investing in the entire energy chain. In order to meet projected energy demand, we are obliged to develop all energy sources—nuclear, coal, renewables, alternative fuels, and oil and gas. That a desire exists to accelerate development of less carbon-intensive energy sources should not obviate the need to insure that our nation has the energy it needs to power our economy—especially as we recover from our economic malaise.
If we are serious about energy security and the pleas from a succession of presidents to break our foreign oil dependency, then we must actively develop our own oil and gas resources. President Obama was right to highlight offshore drilling. There are important domestic sources of oil and natural gas at our disposal. Take the Outer Continental Shelf, which is largely off-limits to oil and gas exploration and production. Estimates place the potential in the OCS at roughly 100 billion barrels of oil, with 30 billion recoverable today.
Meanwhile, the continued growth in production in the United States of unconventional natural gas must also be facilitated. The expansion of so-called shale gas reserves proves the notion that we have within our borders important energy sources to satiate our needs. We must continue to develop them in the most technologically and environmentally appropriate manner possible.
Despite the relatively feckless climate change summit in Copenhagen, it is important that our energy prescriptions also manage carbon expectations. Indeed, there may be no more relevant and overarching aspect of energy policy discussions today than that of climate change—and it is certainly something the current administration finds important. Yet meeting the climate change challenge must also be informed by economic realities and work underway across the world.
There must also be additional focus on the possibilities for carbon sequestration. The United States is the Saudi Arabia of coal, and thanks to its abundance and relatively low cost, coal generates about half of our electricity supply. Thus, our biggest challenge is how to bring technology to bear on coal. Reducing coal plant emissions will demand an investment across a wide range of technologies. Investment in development and demonstration has begun, but the transformation to advanced coal plants will take much more time and money.
However, it might be the need for realistic targets within the confines of the current economic reality that best defines the discussion of managing carbon expectations. Across industry, there is a recurring plea for targets and timetables for greenhouse gas reductions to be aligned with nearer-term capabilities of expanded energy efficiency, enhanced renewables, long-term commercial deployment of new nuclear energy, and clean coal sources.
As we consider these elements of an enhanced energy policy, we must also look at an integral ingredient for the entire “just right” idea: Our prescriptions must foster private investment and free markets.
Transparent, free, and open markets, together with market-based policies, are crucial for the United States and global energy security. Indeed, energy is an international business that is not fenced in by lines on a map. And given the massive price tags for energy investment—the International Energy Agency estimates $22 trillion is needed by 2030 to meet our global energy needs—policies must be sensible, stable, and done right.
Given the long lead times and price tags for energy projects, private investors must be confident that governments will not change the rules of the game, renegotiate contracts, or even pursue legal measures in the middle of long-term projects. Trade and investment across the entire energy chain must not only be encouraged but incentivized. Particularly with regard to efficiency, we must employ market-based solutions that send signals to consumers.
The president spoke eloquently about energy during the State of the Union address. Others frequently speak of the need to launch a Manhattan or an Apollo Project for domestic energy policy-making.
But perhaps it need not be so bold-sounding. Rather, we should think of the lessons from Goldilocks, embrace the “just right” philosophy, and dispense with our too-hot/too-cold inclinations.
Of course, to get it “just right,” Goldilocks had to sample a fair amount of porridge.
Jeremy Martin is a frequent commentator and writer on Latin American and energy issues. Working at the Institute of the Americas at the University of California, San Diego (UCSD), he spends his time delving into the geopolitics of energy and closely following energy industry trends and policy issues across the Americas. He can be found on Twitter at @jermartinioa and contacted via e-mail at jermartin@ucsd.edu.