At their respective conventions, both President Obama and Mitt Romney spoke to a centrally important topic for America and the world: energy. Their positions – political posturing aside – are broadly similar. But rather than a coherent, sustainable vision for the energy future of the United States, both men’s rhetoric reflected the usual exercise in political base-touching, apple pie-polishing, and third-rail avoidance. And two important, perhaps crucial, pieces of the energy puzzle were hardly mentioned at all.
Obama in particular tried to stake a claim to having the energy answers our nation needs, with his acceptance speech dwelling for nearly 300 words on his administration’s energy accomplishments and goals. Since in their essence there was little difference between his underlying points and Romney’s, and since the latest odds in the betting markets currently have Obama as a 2-to-1 favorite to win reelection, I’ll focus primarily on analyzing Obama’s to understand the state of energy politics in this election season – which is, unfortunately, not promising.
Obama’s comments, for those who missed them, are worth reading in their entirety:
You can choose the path where we control more of our own energy. After 30 years of inaction, we raised fuel standards so that by the middle of the next decade, cars and trucks will go twice as far on a gallon of gas. We have doubled our use of renewable energy, and thousands of Americans have jobs today building wind turbines and long-lasting batteries. In the last year alone, we cut oil imports by 1 million barrels a day, more than any administration in recent history. And today the United States of America is less dependent on foreign oil than at any time in the last two decades. ...
We've opened millions of new acres for oil and gas exploration in the last three years, and we'll open more. But unlike my opponent, I will not let oil companies write this country's energy plan or endanger our coastlines or collect another $4 billion in corporate welfare from our taxpayers. We're offering a better path.
We're offering a better path where we — a future where we keep investing in wind and solar and clean coal, where farmers and scientists harness new biofuels to power our cars and trucks, where construction workers build homes and factories that waste less energy, where we develop a hundred-year supply of natural gas that's right beneath our feet. If you choose this path, we can cut our oil imports in half by 2020 and support more than 600,000 new jobs in natural gas alone.
And yes, my plan will continue to reduce the carbon pollution that is heating our planet, because climate change is not a hoax. More droughts and floods and wildfires are not a joke.
Let’s consider the various bases he touched here, and that untouched third rail, to which I shall presently turn.
Energy independence
Everybody loves energy independence – especially independence from oil-producing Middle-Eastern countries that rattle sabers at us, seem stuck in the Dark Ages, and fix oil prices to maximize what we pay them.
The problem is that national energy independence is unattainable and makes no sense. It is a policy that would set us back, as India was set back by its policy of import substitution – insulating its industries against external inputs and competition, retarding its economic growth – until the 1991 reforms that finally jolted its economy back to life.
Energy independence will never be a reality, unless extraordinary international barriers – posed perhaps by conflicts or technological breakdowns, or extreme U.S. isolationism – disrupt normal international commerce. Energy, like other products, flows not to the country that produced it, but to interlinked, competitive international supply chains.
And if we are concerned that sometime in the future, some sort of breakdown in international commerce should indeed cause us to have to depend on our own internal supplies – what then? Wouldn’t it be better, until that unhappy day may come, to use all the supplies we can get from other countries, and preserve our own? Why should we think it preserves our “energy independence” to use all the supplies we can dig up in the United States as quickly as possible?
In fact, energy security is enhanced not by energy independence, but by well-diversified energy interdependence. That, not energy independence, is a better goal.
Clean coal
Clean coal is more of a political slogan than a technology. Coal is profoundly unclean – it is replete with pollutants that need to be removed from the emissions stream when it is burned in electric power plants, it severely pollutes the lungs of coal miners, it releases more radiation into the environment than a nuclear power plant, and it is by far the largest emitter of carbon dioxide, the most abundant greenhouse gas. For coal lobbyists, coal has long been badly in need of a verbal makeover. The words “clean coal” were designed to do that job.
“Clean coal” is nevertheless also a name for a technology – carbon capture and storage, or CCS – that is not even close to cost-effective, if indeed it will ever be commercialized. Its purpose is to remove carbon dioxide from the emissions stream at an electric power plant, compress it, and store it in vast reservoirs deep underground.
Not only is carbon capture and storage very costly, but it could pose a major public health risk. On August 21, 1986, a naturally-occurring pocket of carbon dioxide underneath Lake Nyos in Cameroon, West Africa, escaped from a fissure and killed 1,700 people by suffocation. That’s because carbon dioxide is heavier than air; when such a concentrated dose of it escaped it blanketed the ground, depriving the population surrounding Lake Nyos of oxygen. In Germany, those dangers have given rise to public protests that have prevented a coal-fired power plant from deploying a CCS system. “Clean coal,” at this juncture – barring major breakthroughs in carbon sequestration technology – is unlikely to be a principal energy source of the future.
Biofuels
Biofuels do have the potential to produce substantial quantities of energy, but in the context of the president’s speech it is hard not to suspect that their mention was also a nod to an important political constituency – corn farmers in the Midwest, especially the crucial swing state of Iowa. Corn farming, already long-subsidized in the U.S., has of late been even further subsidized in the name of homegrown renewable energy. But energy from corn ethanol is neither largely homegrown nor renewable. Industrial-scale agriculture uses massive quantities of petroleum in the corn-farming process. Studies have concluded that, while real and potential process technologies can improve the energy balance, nearly as much energy from fossil fuels goes into corn farming as comes out of it as corn ethanol.
But the states that grow corn enjoy the subsidy.
Nevertheless, with continued research, biofuels may be developed that produce substantial amounts of energy economically and without net carbon emissions. (Biofuels that are not produced using fossil fuels emit no net carbon, because carbon is absorbed from the atmosphere in the growing cycle.) However, the production of biofuels competes with the production of food crops. Some biofuel crops may be able to grow on soils that cannot produce food crops, though this is disputed, and biofuel can be produced from food waste, like corn husks, but the potential for driving food prices up and food production down does exist if biofuel expansion does not proceed carefully.
As with many potential energy sources of the future, the problems with biofuels could be solved, either by new technologies or by new synergies with the production of food and other forms of energy. But to the extent that biofuels remain mired in the politics of corn, that potential will take a back seat to their potential as an under-the-radar political payoff.
Energy efficiency
Obama alluded twice in his speech to energy efficiency – not in those words, which may have been perceived by speechwriters as too close to “energy conservation,” which can in turn be cynically ridiculed as “freezing in the dark.”
Nevertheless, the energy efficiency measures to which he alluded include the greatest energy triumph of his administration – an enormous increase in the so-called CAFE (Corporate Average Fleet Economy) standards. By the year 2025, the average fuel efficiency of automobiles sold in the U.S. must be 54.5 miles per gallon – a huge increase. (Current rules mandate an average of about 29 miles per gallon.) This standard levels the playing field for automakers and enables them to plan to a fixed target; in this case the automakers themselves welcomed the regulation. The new standards will help to drastically reduce the United States’ use of oil and emissions of carbon dioxide and other pollutants over the long run.
Obama also referred to the building of homes and factories that waste less energy. This too is an important, practical, and economical goal, one that also benefits from regulatory standards for energy efficiency, similar to the CAFE standards.
Oil subsidies
The President is right that American taxpayers are in a very real sense paying billions to oil companies in “corporate welfare.” At the very least, the huge costs for American military involvement in the Middle East and its defense of seaways around the world, much of which serves to protect and ensure oil supplies and revenues, are borne by the U.S. taxpayer – though there are many other subsidies too, both hidden and more direct. U.S. consumers enjoy low gasoline prices, for example, through an implicit subsidy relative to Europe and many other parts of the world, where taxes on gasoline are much higher.
Many advocates of renewable energy argue that as a first order of business the subsidies to oil and coal and gas and nuclear should all be removed. Failing that, they argue that solar and wind should enjoy equivalent subsidies – and those industries have begun to receive them.
What the U.S. public seems utterly unready for is the idea that instead of all taxpayers paying for these fossil energy subsidies, the energy users should pay for them, in proportion to how much energy they use, in the form of a user fee. That is, not everybody, but only those who use a fossil fuel, should pay a user fee for the defense of its supply chain and other subsidies – including the current invisible subsidy of allowing energy users to damage the environment without paying the full cost of their actions.
Guess what that user fee is called? It’s called a tax. A tax on gasoline, a tax on coal, a tax on oil – effectively a tax on fossil fuels. Why should all citizens pay for these things – as all U.S. citizens pay for defense of the oil supply chain – without regard to how much of the energy they use? The tax should be specifically placed on each unit of gasoline, oil, or coal, and the proceeds returned to the general taxpayer to make the tax revenue-neutral. But in today’s ignorance-pandering, ignorance-stoking politics no one dares breathe a hint of such a tax, even though virtually all economists, Republican and Democratic alike, advocate it.
The oil and gas fracking boom, renewable energy, and climate change
It was highly laudable that Obama declared loud and clear that “climate change is not a hoax.” But it is perplexing that so many people in the United States still believe that it is.
The eventual effects of climate change are unpredictable but highly worrisome. That unpredictability means that it could conceivably turn out to have little ill effect, yes, but much more importantly it means that the effects of climate change could be even more catastrophic than we currently imagine. Such a risk is not to be taken lightly.
Considering on top of that fossil fuels are not only in finite supply but also increasingly difficult and costly to extract, the signs are clear that we must begin planning very seriously, and sooner rather than later, for the fossil fuel endgame.
Fracking – the popular shorthand for hydraulic fracturing, a recently-developed process of cracking gas and oil out of source rocks with enormous infusions of pressurized water and chemicals – is one example of how fossil fuels are increasingly difficult to extract. And there is perhaps no more vivid illustration than the massive BP Deepwater Horizon oil spill in the Gulf of Mexico, which resulted from drilling in 5,000 feet of water to a total depth of 18,000 feet. We didn’t used to have to go to such lengths to access oil. Environmental risks are a consequence of this extreme difficulty, as are increased costs. The conceit that advances in technology will always make things easier and cheaper may not apply here.
Renewables – wind, solar, water, and biofuels – are the apple pie and motherhood of energy rhetoric. Everybody sees a shining future in renewables. They could replace fossil fuels completely, in theory. Scenarios have been developed in which all of the world’s energy could be supplied by renewable energy. If it can happen quickly enough, it could solve the dual challenges of climate change and dwindling fossil fuels. But wind and solar, though growing fast, still represent only a tiny percentage of total energy production (2% currently in the U.S.). Their problems – intermittency, high demand for energy storage, and large-scale land usage – are great. They are expensive. And public resistance to wind energy in particular is already mounting.
All of the energy alternatives that Obama mentioned have limited capacity to solve the looming problems of climate change and fossil fuel depletion. Hence, these risks may need to be addressed by the measures he did not mention.
Can we cut U.S. oil imports in half by 2020 as Obama claims? That depends partly on the base year used for the calculation – oil imports have already been cut substantially, thanks to the fracking boom. If automobile fuel efficiencies decline rapidly ahead of the 2025 deadline, and if fracking continues apace, then Obama’s target is conceivable. But fracking is limited in many areas, such as the massive Colorado shale formations, by lack of water. And, of course, as I have said, it’s a senseless goal, since if we want long-term energy independence we would be better advised to use foreign oil now and keep our own in reserve.
The third rail
Not a single mention was made by Obama of the source that provides 20% of U.S. electricity, and more than 8% of our total energy use – nuclear energy. From Romney, nuclear earned only a single, fleeting reference.
The treatment of nuclear energy in public debate is even more perplexing than the treatment of climate change. I’ve been to well-attended public seminars in which prominent scientists present the evidence on climate change, the audience all agrees that the problem is very serious and something must be done, there is much discussion of the need to reduce our energy use and our consumption in general and to increase the use of renewable energy, and not one word – not one single word – is said about nuclear energy. It’s as if no one ever heard of it. Yet the operation of nuclear power plants emits no greenhouse gases.
That’s in part because a substantial segment of the U.S. public believes that nuclear energy is unthinkable and even unmentionable. This attitude was enhanced by the saturation media coverage of the Fukushima, Japan, nuclear power plant accident, which so far has killed no one, while the less-intensively-covered tsunami that was its immediate cause took nearly 20,000 lives.
A genuine public discussion of America’s energy future must include nuclear energy. Obama squarely – and, perhaps, bravely – tackled one controversial subject, climate change. Once that is broached, however, there is no avoiding confronting the need for nuclear energy. America might – like Germany, whose government recently announced that it will phase out all nuclear power – decide that it doesn’t need it, though the U.S. recently licensed the first nuclear power plants in over 30 years. Many of those who are concerned about climate change view gas, not nuclear, as the bridge to the renewable energy future, because gas emits half as much carbon dioxide as coal. But others, similarly inclined, believe that gas, too, emits too much carbon dioxide for our rapidly warming environment to bear.
Nuclear energy poses the twin problems of potentially devastating, if remote, risks and potentially devastating costs. In fact, nuclear has a history of runaway cost overruns, as much as an order of magnitude greater than estimated costs. Yet the forecasts of estimated costs made now by a variety of respected authorities are low, and so are the estimated risks. There is a gap between most authoritative expert opinion (though not all) and public opinion that seems unbridgeable.
In short, the two critical pieces of the solution to the energy puzzle, a fossil fuel tax and nuclear energy – on which placement of the other pieces may crucially depend – are the only things that Obama did not mention, and his challenger is doing nothing to change this state of affairs.
It seems when it comes to energy, the overwhelming favorite in this election will remain the status quo.
Michael Edesess is an accomplished mathematician and economist with experience in the investment, energy, environment and sustainable development fields. He is a Visiting Fellow at the Hong Kong Advanced Institute for Cross-Disciplinary Studies, as well as a partner and chief investment officer of Denver-based Fair Advisors. In 2007, he authored a book about the investment services industry titled The Big Investment Lie, published by Berrett-Koehler.
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