Tackling Energy’s Biggest Hurdles

What are the greatest energy challenges facing the country right now? Where do climate change and energy security fit into this debate? What can the private sector, state and local governments, and other countries do to get closer to tackling some of the biggest hurdles while Washington is gridlocked?

These aren’t easy questions to answers, but the biggest challenge facing the nation is a failure to address energy realities.

Since 1973, energy policy has been driven by wishful thinking, not facts and objective truths. The extreme polarization that we have observed in recent years only makes our energy problems worse. The only way to fix the extreme state of gridlock that hampers progress on all major issues is for voters to demand pragmatic solutions instead of posturing. As Henry Clay once observed, politics is about governing, and you can’t govern if you can’t compromise. Today, compromise is viewed as some sort of fatal disease and finding common ground is where the other guy capitulates.

When politicians use energy policy to play favorites or push technology by forcing mandates, they are preventing the economy from achieving its full growth potential. Economic growth is a function of labor, capital, energy, productivity, ingenuity, and an investment friendly climate. Each element is essential to success.

It should be obvious that economic activities across industries depend on power and mobility to produce and distribute the goods and services produced. It should also be obvious that the cost of those factors of production affect how the others are used, and therefore that effective policy should yield the most abundant and affordable energy achievable.

A background paper by the Congressional Office of Technology Assessment stated, “Energy is a fundamental input in our economy, essential for running our country’s factories, shipping the Nation’s output, and ringing up the sales.” The Encyclopedia of Energy contains a survey article by David Stern of Rensselaer Polytechnic Institute which states “energy use and the level of economic activity are found to be tightly coupled.”

We need an energy policy that recognizes energy is a fundamental economic input. Such a policy should also be based on an understanding of the unintended consequences of interfering with market forces or attempting to mandate a technological advance on a politically determined schedule. That has happened time and time again over the past 39 years. The most recent and perhaps most flagrant example is the mandate schedule for cellulosic ethanol – a product that doesn’t exist for commercial use – and then the imposition of fines for not meeting that requirement.

Overcoming the strong opposition to continued reliance on fossil energy is an economic imperative. The shale gas revolution offers significant investment opportunities for industries that rely on natural gas – chemical companies, for example. Investments that have been moving abroad will return to the US if zealotry does not become a mountain too high to climb. Energy investments tied to increased production of low priced gas brings with it good paying jobs.

There are comparable opportunities for further increases in North American oil production which also produces job creation and domestic investment. Unrealistic and unreasonable impediments to oil production off of the East Coast, Alaska, and the Easter Gulf simply mean that foreign imports will remain higher than necessary.

Transportation, which will rely on petroleum based fuels for decades to come, is essential for both commerce and personal mobility. To the extent those fuels are domestically produced, the risk associated with them is reduced, a clear economic benefit. It is ironic that the President argues against import dependency but has been a laggard in offering public lands for exploration and production. It is also ironic that in his push for uneconomic electric vehicles he is willing to trade one type of dependency – oil imports – for another. Electric vehicles use lithium batteries which require rare earth minerals for which China has a virtual global monopoly.

Beyond the opportunities for greater domestic development of our own fossil energy resources, there is the challenge to establish and fund a long term R&D program that is allowed to run its course without political meddling and which provides opportunities for public-private collaboration.

The best policy ideas and proposals will be for naught if the Administration and Congress remain unwilling to “work the problem” and find common ground.Bipartisanship from the center would have a greater value today than any time in recent memory.

Originally published by the National Journal at http://energy.nationaljournal.com/2012/09/tackling-energys-biggest-hurdl.php#2244462.

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