The Energy Trap

Democrats voting in Ohio and Texas may well decide the shape of the U.S. presidential election. Regardless of who they choose to run against Sen. John McCain, the all but certain Republican candidate, it is likely that energy issues will figure more prominently in the election than at any time in the last generation. High prices are sapping economic growth, the No. 1 concern across most of the country. Gasoline is now approaching $4 a gallon; natural gas and electricity are also more costly than a few years ago. Global warming has become a bipartisan worry, and solving that problem will require radical new energy technologies as well. All this is good news in the rest of the world, which is hoping that a new regime in Washington will put the United States on a more sustainable energy path.

It may be a vain hope. It is extremely unlikely that Washington will ever supply a coherent energy policy, regardless of who takes the White House in November. That's because serious policies to change energy patterns require a broad effort across many disconnected government agencies and political groups. Higher energy efficiency for buildings and appliances, a major energy use area, requires new federal and state standards. Higher efficiency for vehicles requires federal mandates that always meet stiff opposition in Detroit. A more aggressive program to replace oil with biofuels requires policy decisions that affect farmers and crop patterns-yet another part of Washington's policymaking apparatus, with its own political geometry. New power plants that generate electricity without high emissions of warming gases require reliable subsidies from both federal and state governments, because such plants are much more costly than conventional power sources. Approvals for these new plants require favorable decisions by state regulators, most of whom are not yet focused on the task. Expanded use of nuclear power requires support from still another constellation of administrators and political interests. And so on.

Whenever the public seizes on energy issues, the cabal of Washington energy experts imagines that these problems can be solved with a new comprehensive energy strategy, backed by a grand new political coalition. Security hawks would welcome reduced dependence on volatile oil suppliers, especially in the Persian Gulf. Greens would favor a lighter tread on the planet, and labor would seize on the possibility for "green-collar" jobs in the new energy industries. Farmers would win because they could serve the energy markets. The energy experts dream of a coalition so powerful that it could rewire government and align policy incentives.

This coalition, alas, never lasts long enough to accomplish much. For an energy policy to be effective, it must send credible signals to encourage investment in new equipment not just for the few months needed to craft legislation but for at least two decades-enough time for industry to build and install a new generation of cars, appliances and power plants, and make back the investment. The coalition, though, is politically too diverse to survive the kumbaya moment.

Just two weeks ago the feds canceled "FutureGen," a government-industry project to develop technologies for burning coal without emitting copious greenhouse gases, demonstrating that the government is incapable of making a credible promise to help industry develop these badly needed technologies over the long haul. (The project had severe design flaws, but what matters most is that the federal government was able to pretend to support the venture for as long as it did and then abruptly back off.) Similarly, legislation late last year to increase the fuel economy of U.S. automobiles will have such a small effect on the vehicle fleet that it will barely change the country's dependence on imported oil and will have almost no impact on carbon emissions. Democrats and Republicans alike claim they want to end the country's dependence on foreign oil, but neither party actually does much about it.

The only policies that survive in this political vacuum are those that target narrower political interests with more staying power. Thus America has a highly credible policy to promote corn-based ethanol, because that policy really has nothing to do with energy; it is a chameleon that takes on whatever colors are needed to survive. It is a farm program that masquerades as energy policy; at times, it has been a farm program that masquerades as rural development. As an energy policy it is a very costly and ineffective way to cut dependence on oil. As a global warming policy it is even less cost effective, since large-scale ethanol doesn't help much in cutting CO₂ and other warming gases. Similarly, the United States has a stiff subsidy for renewable electricity-mainly wind and solar plants-because environmentalists are well organized in their support for it. The coal industry periodically gets money for its favored technologies, as in FutureGen, but even that powerful lobby has a hard time getting the government to stay the course.