Putting Energy Security On the Fast Track
By Paul Werbos
The International Energy Agency (IEA) has predicted that oil will go back up to $150/barrel within a year or two of when the world economy recovers. If that happens, and if the US does not make a drastic reduction in its oil dependency soon enough, we will be looking at a $700 billion/year import bill – enough to put the US economic recovery in deep doubt.
On June 24, in the New York Times, Thomas Friedman has written: "There has been a lot of worthless chatter about what President Barack Obama should say about Iran's incipient 'Green Revolution'. Sorry, but Iranian reformers don't need our praise. They need the one thing we could do…. Oil is the magic potion that enables Iran's turbaned shahs -- 'Shah Khamenei' and 'Shah Ahmadinejad' -- to snub their noses at the world and at many of their own people as well. .. Trust me, at $25 a barrel, he won't be declaring that the Holocaust was a myth anymore."
The Waxman-Markey bill in the House does offer some useful steps to help break our dependence on oil – mainly through the provisions on recharge stations for plug-in hybrids and open fuel standards. But the Obama/Reid idea for low-carbon fuel standards was dropped from the bill, because of oil company opposition, and the bill may or may not pass the Senate anyway. We need strong independent, additional action to move as fast as we can. If we do not bite the bullet on import dependency, everyone in the US will suffer, from workers to Exxon.
Friedman has proposed that we simply add a $1/gallon tax on gasoline, to encourage more use of alternative fuels, electric transportation and conservation in general – like what we saw just a year ago. But there is a more efficient, revenue-neutral way to move much faster towards oil independence.
- On the electric side – we can extend the tax credits for plug-ins and hybrids to the year 2020, and remove all the restrictions on how many cars a manufacturer can sell. That, along with more and better recharge stations, are what the leading hybrid makers have told us they need the most, to justify very large and growing investments in this area. (We also need a more focused effort to achieve breakthroughs with batteries, but that's a task for ARPA-E or NSF.)
- On the liquids side – we should provide a $75 per barrel support price for liquids made from coal, by technologies that do not release more than 20% of the CO2 value of the fuel during production. We should provide a $100 per barrel support price for biofuels or for liquid fuels made from flue gas streams by injecting renewable energy, as a permanent entitlement. There have been major breakthroughs in these areas in recent years; the companies responsible say they can get all the capital they need from loans, if they have a guarantee like this of what they can sell their product for. This (plus an open fuel standard) would move us as fast as possible to more use of alternate liquids.
To pay for this, we would advocate an additional tax on gasoline, to be recalculated every year and raised (but not lowered) if necessary to cover the full cost of these two essential efforts and avert impending bankruptcy of the highway trust fund. We are not advocating more permission for conventional drilling for oil and gas, because of its limited potential output, but if that's part of the cost of getting this passed, it would be acceptable.
Paul Werbos is currently a Brookings Institution Legislative Fellow, as well as a National Science Foundation research program director. This paper does not reflect the official views of any of the organizations for which he works. .
blog comments powered by Disqus