Current U.S. Energy Policy: Risk Management That Is Worse Than Ever

Current U.S. energy policy is, in fact, a hodgepodge of disconnected policies designed for specific constituencies with no coherent goal. The country has subsidies for fossil fuels, subsidies for nuclear power, subsidies for wind and solar, and subsidies for insulating and retrofitting buildings. We also have energy standards for some appliances and miles per gallon standards for automobiles.

What never gets asked and answered definitively in the policy debate is this: What should our ultimate goal be and when should we aim to achieve it? The first part of the question has elicited so many answers from so many constituencies that I may not be able to represent them all here. But here is an attempt to categorize the main lines of thinking concerning the country’s energy goals:

1. Seek the cheapest price for energy with the implication that environmental consequences should not be tallied as part of the cost.
2. Complete a transition to renewable energy as quickly as possible while drastically reducing the burning of fossil fuels.
3. Replace all fossil fuel energy with nuclear power.
4. Develop all sources of energy to make sure we have enough at reasonable prices. This is often called the “all-of-the-above strategy.”

Goal 1 is really the argument put forth by the fossil fuel industry and therefore a defense of the status quo. Goal 2 is the dream of every climate change activist and clean-tech executive. Goal 3 seemed to be gaining some momentum before the accident at Japan’s Fukushima Daiichi nuclear plant dashed hopes for a widespread nuclear renaissance.

Goal 4 is being touted In 2010 he wrote :

This means that in order to sequester just a fifth of current CO2emissions we would have to create an entirely new worldwide absorption-gathering-compression-transportation-storage industry whose annual throughput would have to be about 70 percent larger than the annual volume now handled by the global crude oil industry whose immense infrastructure of wells, pipelines, compressor stations and storages took generations to build. Technically possible—but not within a timeframe that would prevent CO2 from rising above 450 ppm [parts per million]. And remember not only that this would contain just 20 percent of today’s CO2 emissions but also this crucial difference: The oil industry has invested in its enormous infrastructure in order to make a profit, to sell its product on an energy-hungry market (at around $100 per barrel and 7.2 barrels per tonne that comes to about $700 per tonne)—but (one way or another) the taxpayers of rich countries would have to pay for huge capital costs and significant operating burdens of any massive CCS [carbon capture and storage].

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Perhaps the simplest way to manage the energy transition we must undergo would be to impose a high and ever rising tax on carbon. Such a tax would not favor one particular solution to carbon-free energy. But, it would move people to conserve and to switch from carbon fuels. It would also provide inventors and businesses with the incentive needed to work out the quickest, most economical path to a renewable energy economy.

Quite often politicians and representatives of the fossil fuel industry—sometimes it’s difficult to tell the difference—will say that the United States shouldn’t undergo this energy transition alone because it will be put at a competitive disadvantage on world markets. Saying this is really the equivalent of saying that we should maintain our current course until it becomes obvious—even to the most dimwitted—that we are all committing suicide.

Waiting for catastrophe to happen before acting means that it’s too late to act. It is precisely this scenario that proper risk management is designed to avoid. If I were to grade America’s risk management strategy with regard to energy supply and climate change, I would, not surprisingly, give it a failing grade.

I only wish the damage inflicted by that strategy were limited to bad marks. Instead, the real-world consequences are almost certain to grow larger and larger, the longer the country ignores intelligent risk management principles.

Written By: Kurt Cobb