No New Energy Czar

We've been down this policy dead-end before

According to rumor, President-elect Barack Obama is considering the creation of an Energy Security Council inside the White House. The council, modeled after the National Security Council, would be headed by a National Energy Advisor who would manage the country's energy transformation to a low-carbon economy. This idea is reminiscent of the appointment of "energy czars" in past administrations. This concept of a National Energy Advisor plays a big role in a Center for American Progress (CAP) white paper, "Capturing the Energy Opportunity: Creating a Low-Carbon Economy." CAP president and former Clinton White House chief of staff John Podesta, who co-authored the paper, is now a co-chair of the Obama transition team.

During the election campaign, Obama outlined an ambitious plan to cut U.S. greenhouse gas emissions, chiefly carbon dioxide produced by burning fossil fuels, by 80 percent by 2050. This would be accomplished by imposing a cap on carbon dioxide emissions and then auctioning permits to businesses for each ton of carbon dioxide emitted. Over time the cap drops until emissions are 80 percent lower than they were in 1990. The initial auction might raise as much $100 billion, of which Obama plans to spend $15 billion annually on low-carbon energy research and development. The remaining auction revenues will be used for relief and rebates to help families and communities to cope with higher energy costs.

Obama also promised to put one million plug-in hybrid cars—cars that can get up to 150 miles per gallon—on the road by 2015, by offering a $7,000 tax credit to purchasers. Obama also wants to provide $4 billion in retooling tax credits and loan guarantees to domestic automakers to help build the new fuel efficient cars in the U.S. In addition, Obama promised to ensure that 10 percent of our electricity comes from renewable sources by 2012, and 25 percent by 2025. These elements of Obama's energy and climate plans mirror proposals in the CAP's energy white paper. For example, the CAP suggested a $8,000 tax credit to the purchasers of the first one million plug-in hybrid cars and wants to require that 25 percent of electricity comes from renewable sources by 2025.

A National Energy Advisor heading up an Energy Security Council is supposed to coordinate all Federal efforts at transforming our energy economy. But we've been down this path before. During the "energy crisis" of the 1970s, President Richard Nixon appointed William Simon "energy czar." As Simon tells it, "President Nixon announced to the cabinet that I was to have 'absolute authority' and compared the job he was giving me with the role that Albert Speer played in the Third Reich when he was put in charge of German armaments." Simon confessed to being a bit uncomfortable about being likened to the Nazi Minister of Armaments and War Production.

Nevertheless, Simon became the director of the Federal Energy Office and overseer of the Emergency Petroleum Allocation Act of 1973 which imposed price controls on oil. Thirty-five years ago this month Nixon launched Project Independence with the goal of achieving energy self-sufficiency by 1980. In 1974, Time magazine reported that experts estimated that cutting U.S. dependence on foreign oil in half by 1985 would cost $500 billion to $1 trillion over the next ten years ($2 to $4 trillion in today's dollars).

In April 1977, President Jimmy Carter declared the energy crisis "the moral equivalent of war." To prosecute this "war," Carter designated former Defense Secretary James Schlesinger as his "Energy Czar" and eventually persuaded Congress to authorize a new cabinet-level Department of Energy to centralize energy policy and research in August 1977. Carter too promised to cut our dependence on foreign oil, declaring in a nationally televised speech in 1979: "Beginning this moment, this nation will never use more foreign oil than we did in 1977—never." Despite Nixon's, Carter's, and subsequent presidential energy independence projects, we import two-thirds of our oil today.

So looking back, did the drive to elevate and centralize energy policy and research actually help? Not a lot, as Robert Fri, a former deputy administrator of both the Environmental Protection Agency and the Energy Research and Development Administration points out. Fri noted in the Fall 2006 Issues in Science and Technology that a National Research Council study of DOE research and development expenditures between 1978 and 2000 uncovered less than stellar results. It is true that the NRC report estimated that DOE generated some $40 billion in economic benefits for the roughly $13 billion it spent on energy conservation and fossil fuel R&D programs. However, as Fri notes, "A mere 0.1 percent of the expenditure accounted for three-quarters of the benefit." That amounts to $13 million spent on unsexy R&D programs that resulted in electronic ballasts for fluorescent lighting, energy-efficient windows, and better refrigerators. These three programs yielded $30 billion in benefits. Fri further observes, "Three-quarters of the expenditure—a little over $9 billion—produced no quantifiable economic benefit. Half of this money was applied to synthetic fuel projects that turned out to be at least a couple of decades premature."

As Fri told Chemical & Engineering News this week: "The government is very good at starting energy projects that it believes will solve energy problems, but it is not very good at generating the intended results." For example, had the Feds somehow managed to continue the synfuels program, the U.S. would now be turning coal into the equivalent of 2 million barrels of oil a day with the unintended consequence of producing huge amounts of greenhouse gases. So how sure can an Obama administration's National Energy Advisor be that plug-in hybrids, or photovoltaics, or carbon capture and sequestration of coal plant emissions are the answers to our energy security and climate change problems? Perhaps biofuels produced using microbes is how we should power our cars. Or maybe concentrated solar thermal is a better idea for renewable base load electric power and coal-fired plants should be phased out in favor of nuclear ones.

Given that President-elect Obama is going to try to address what he sees as the Janus-faced problems of climate change and energy security, adding another layer of bureaucracy is not the way to go. The incoming Obama administration needs only to deploy one tool—its plan to cap and auction carbon dioxide emission permits. The rest of the complicated energy plan, with its plethora of top-down mandates, amounts to counterproductive meddling.

Once a sufficiently high price is set on carbon dioxide emissions, tens of thousands of energy researchers and entrepreneurs will develop and test various new low-carbon technologies in the market. This means that no energy czar or council will have the opportunity to waste more billions by picking technology clunkers. Renewable energy production mandates won't be necessary. A high carbon dioxide price will stimulate the production of 25 percent of the country's energy using renewable sources. Tax credits for low-carbon automobiles aren't needed either. Higher gas prices will encourage drivers to switch to plug-in hybrid, hydrogen fuel cell, or bioethanol vehicles, whichever turns out to be cheapest. Imposing energy efficiency standards on household appliances or providing tax credits to weatherize houses will be superfluous as consumers seek to lower their electricity bills. And instead of rebates, the Obama administration could use the revenues raised by auctioning emission permits to cut federal taxes on individuals.

Instead of "change we can believe in," appointing a new energy czar would be a failed history repeating itself.

Ronald Bailey is reason's science correspondent. His book Liberation Biology: The Scientific and Moral Case for the Biotech Revolution is now available from Prometheus Books.