restoring American power

The right steps now could take us to a brighter future.

by Reid Detchon

National security and job creation are key issues in this fall's presidential campaign. Energy policy is not—but it has big implications for the nation. Much is at stake on getting energy policy right.

Energy is the linchpin of our economy. Whether powering our factories, lighting our offices, or moving our products and produce, energy is essential to every job. The stability of global markets, the ability of developing countries to meet the hopes and needs of their growing populations, the health of the world's environment, and our children's future quality of life—all will be affected by how we produce and use energy.

Abundant, affordable energy has enabled our nation and other developed societies to achieve unprecedented prosperity. Without it, developing countries cannot hope to rise out of poverty and social instability. But our present energy patterns cannot be sustained if we are to meet the world's future needs responsibly. American leadership, innovation, and investment are needed to develop and deploy the next generation of energy solutions that will create new jobs and economic growth that will be critical to our future standard of living.

If I were to advise either camp vying for the presidency—and I worked with the prior Bush administration on energy policy—I would emphasize three main challenges that lie ahead. First, we must reduce the world's dependence on oil, and help free consumers from the economic, political, and environmental risks that this dependence entails. Next, we must take steps to control the emissions from the burning of coal, oil, and natural gas that are affecting the global climate. And we must recognize that extending access to modern energy services to poor people around the world can demonstrate American leadership as well as create new markets.

These are challenges, but they are also opportunities to create new technologies, new industries, and new jobs; to make our nation more secure; and to deal responsibly with great risk and protect this world for our children and grandchildren and generations to come.

It should be clear that our dependence on oil poses a continuing and serious danger to America's security and economic well-being. More than half of the oil we use is imported. If terrorism or conflict disrupts the flow of oil, particularly in Saudi Arabia, prices will go through the roof throughout the world and cause economic chaos. Strategic stockpiles of petroleum can only partially and temporarily ameliorate the pain of a supply disruption, and can do even less to ease soaring prices.

There are just three ways to address the problem—find more oil, use less oil, or use something else. The first choice—to find more oil—is inherently limited. It would be great if we could magically command more oil to appear, but theories must yield to facts. And the facts are that we consume 25 percent of the world's oil production every year, and the Persian Gulf has two-thirds of the world's proven oil reserves, while we have just 2 percent. Forget about the Arctic National Wildlife Refuge. Even if we were able to produce there, using the most optimistic projections, 20 years from now our oil imports would drop only from 70 percent to 64 percent of our annual consumption. We just can't drill our way to energy independence: The oil isn't there to do it.

But we can use less, and we can develop alternatives. The first part is obvious: We could reduce our oil consumption significantly if our cars and trucks went farther on a gallon of gas. Thirty years ago Congress set standards, and fuel economy improved 50 percent over the next 10 years. We can achieve those same gains again: Technology can deliver another 50 percent improvement. We can do that and still have the cars and trucks we want to drive. High-efficiency hybrids get 50 miles to the gallon, with the same size and performance as their gasoline counterparts.

Detroit is investing billions in advanced technologies. And while automakers want American consumers to embrace those technologies, they don't want government mandates, such as higher CAFE standards. So how can these advanced cars make it to market? One alternative is to use tax incentives—one for consumers, to get them to try something new, and one for the automakers, to get them to rebuild their assembly lines in the U.S. That's an investment in jobs and economic growth. The automakers want to do it; the auto workers want to do it; it's time to get going.

The second half of a strategy to reduce our use of oil must involve changing what we put into our gas tanks. Clean-burning hydrogen is an attractive long-term option, but our national security can't wait for the so-called hydrogen economy to arrive. Ethanol, made from corn, is a high-octane fuel that can be blended with gasoline to improve performance. More than 3 million cars on the road today can use gasoline and ethanol interchangeably—but that's not enough. To put a real dent in our oil use, we need to make ethanol cheaper and more abundant. Again, technology is the answer.

Biotech-enhanced enzymes can go beyond corn and turn all kinds of crops and plants—even grasses and solid waste—into ethanol and other "biofuels." With a crash program, we could replace a quarter of our gasoline use with these biofuels in the next 10 to 20 years.

Put a biofuel blend into a hybrid vehicle, and you can have a sport utility vehicle that goes 150 miles on a gallon of gas. That's just one example of why technology is the best approach. Consumers get the cars and trucks they want, but use less oil and cause less damage to the environment.

We now spend $129 billion a year on imported oil. That's a number that's hard to comprehend—nearly $500 a year for every man, woman, and child in America. It's more than double all the net farm income for the entire country. If we spent a fraction of that money on creating a domestic energy industry from agriculture, we could create good jobs for good people who are now forced to leave their land and leave their families behind because there is no opportunity for them in rural America.

If ending oil dependence is Job 1, Job 2 is slowing global warming. It, too, can be turned from challenge to opportunity.

Like the sorcerer's apprentice, we are tampering with a system that we do not fully understand and cannot control, and we do so at our peril. The world's climate is changing—about that, there is no credible scientific disagreement. Global temperatures have broken out of a pattern they maintained for the last 1,000 years, rising higher in the last two decades than they have in centuries. Though not the sole culprit, carbon dioxide from power plants and automobiles seems to be playing a decisive role.

The risk of climate change is too great not to act—but equally large is the opportunity. A staggering $16 trillion will be needed in world energy investments over the next 25 years, including $3 trillion in North America alone. If we approach this challenge with purpose and vision, that spending will be the basis of new energy industries that will create an explosion of new jobs and economic growth. This may well be the largest job-creation opportunity for the United States in the 21st century.

The U.S. once led development of renewable technology like these photovoltaic cells. Now other countries are taking the lead and may reap economic benefits. A dedicated energy policy could reverse that trend.

Energy-related assets are long-lived, and change comes slowly to them. Changes aimed at reducing oil use or carbon dioxide emissions are so fundamental that they will, in most cases, require replacement of existing capital stock—whether power plants, industrial equipment, or automobiles—to switch
fuels, capture emissions, increase efficiency, or redesign production. Sudden changes that force premature retirement of these assets can be expensive, wasteful, and disruptive, especially to key sectors of the labor force. Well-designed policies and incentives to accelerate the turnover of capital stock, however, will encourage investment in new technologies that increase productivity, reduce emissions, stimulate economic growth, and create jobs.

Coal is America's most abundant resource—we have 250 years' worth of supply. It is our dominant fuel for electric power generation. If we clean up its global warming emissions, coal can become the centerpiece of our electricity production for another century or more. New technology—most likely integrated gasification combined-cycle plants—can convert coal into clean-burning gas and then capture its emissions.

This is hugely important for the nation and the world. China and India also have very large coal reserves. Over the next 30 years, those two countries will account for two-thirds of the increase in world coal demand, principally for electricity. If they continue to use present-day technology, we will all suffer the consequences; new technology, on the other hand, could render coal combustion harmless. Developing this new technology and selling it abroad would help reduce the national trade deficit—which at present is at record highs. In the long term, it could make coal a low-cost source of hydrogen for fuel cells in buildings and cars and further reduce our dependence on oil.

The transition to this future will depend on an aggressive program of research and development and incentives for power plants to adopt this new technology. The current administration has started down this path, but not fast enough. We need to increase the pace and level of effort by five to 10 times. Coal can be the focus of a high-tech future and the next generation of electric power plants around the world.

America is blessed with natural riches, riches like no other country on earth. But don't stop with the usual suspects: coal and oil and gas and the rest of our mineral wealth. Our natural riches also include our soil and our climate—the sun and the wind and the rain. These are energy resources, too—energy resources that will never run out and never increase in price. Technology gains are steadily making these renewable energy sources cheaper and more efficient. Sixteen states already have renewable energy standards, states as different as Texas, Nevada, and Maine.

The knock on renewable energy is that it's too expensive, but this is short-sighted: A 20 percent renewable energy standard by 2020 would save consumers $27 billion compared to business as usual, displacing natural gas. Other countries have already moved ahead of us—Denmark with wind; Japan with solar panels; Britain with its bold attempt to capture energy from waves. The U.S. ought to be leading the world in these new technologies—both to show the way forward toward a future of sustainable energy and to create the next great American industry.

Biofuels made from crops like these soybeans could radically cut our nation's dependence on imported oil—and revive flagging rural economies.

The cheapest energy, of course, is the energy that you don't use. Smart energy—doing more with less—is good business practice. Good building design, for example, can save energy for 50 to 100 years. Providing tax incentives for such "green" buildings is a smart economic investment.

For reasons of both efficiency and security, we also need big changes in our electric power network. In this digital age, the need for high-quality, reliable electricity makes our power grid almost as important as our highway system. Yet the grid is antiquated, fragile, and inefficient, operating for the most part on 50-year-old technology. Running today's digital society through yesterday's grid is like running the Internet through an old telephone switchboard.

Routine outages and power disturbances cost U.S. businesses tens of billions of dollars a year. Our power system is also shockingly vulnerable to attack. A serious accident or an act of sabotage could cripple major regions for days or weeks and do enormous damage to the economy, much like a disruption in oil supply. As critical as electricity is to our economy, modernizing the power grid may be the single most important investment we can make in our homeland security.

Fifty years ago, Dwight Eisenhower had the boldness and vision to create an interstate highway system in a nation of two-lane roads, and it transformed our economy. Over time, a very large change was accomplished with a very small impact on consumers. Modernizing our electric power system can open up the same range of new opportunities for technology and innovation.

This prototype bus possesses an advanced hybrid-electric drivetrain. A program to expand the use of hybrid technology is a critical step in reducing oil consumption.

All these steps make sense on their own. They will create new businesses and new jobs. They will be good for the environment. They will reduce demand for natural gas and bring the price of gas back down. They will also take us aggressively in the right direction on global warming. They turn challenge into opportunity.

Once again, the states are showing leadership, under both Republican and Democratic governors, because Washington has not done so: 35 states have completed greenhouse gas inventories, and 25 states are working on action plans with cost-effective options for reducing their emissions. They recognize the seriousness of the problem and the importance of action.

Clean, sustainable energy technologies are important to the whole world's prosperity and security. Nearly two billion people lack the kind of energy services that we take for granted—lights to read by, refrigeration for food and medicines, transportation to take products to market. Their grinding poverty is a tinderbox of discontent. Access to modern energy technology will enable them to prosper—and clean energy will enable economic growth without destabilizing the climate further.

U.S. leadership in making clean energy affordable in the developing world will advance our own interests by reducing both oil dependence and the magnitude of climate change. This new course, investing in a new energy future, is an economic opportunity for America. It is also an example of responsible leadership to turn away from policies that damage our planet and our health, and compromise our children's future.

I would gladly tell the next president—either George W. Bush returning to the White House or John Kerry beginning his first term—not to be daunted by the changes that are needed. This is a time of opportunity. A major technological revolution is beginning in energy, with great potential markets. And the reality is that, where America goes, others will likely follow. The world is watching to see what next step we take and whether American can-do will chart a new course for everyone.

Americans are at our best when we turn crisis into opportunity. The American people deserve an energy policy that sees beyond today. The old foot-dragging politics of parties, interest groups, and industries must give way to a concrete long-range energy program. For the next president, this great challenge is simply an opportunity to accomplish great things.


Reid Detchon is the executive director of the Energy Future Coalition in Washington, D.C.

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