Post in the Hill's Congress Blog

I've got a new post up in the Hill's Congress Blog. I've reprinted it below. 

Thirty-seven years ago, President Richard Nixon announced a national goal that by “the year 1980, the United States will not be dependent on any other country for the energy we need to provide our jobs, to heat our homes, and to keep our transportation moving.”
 
Since this 1974 State of the Union address some sort of ‘energy independence’ has been a stated policy of every Presidential administration, but the United States though has not come anywhere near ‘energy independence.’
 
Today, we have an opportunity to set on a road to achieve these goals.

Launch of America's Energy Choices

At lunch today, I gave a presentation at ASP's office to mark the release of my new white paper "America's Energy Choices" (or read it below). This report marks an effort by ASP to begin to outline a new way of looking at how America uses and produces energy.

The problem with American discourse on energy today is that arguments about energy are too often based on which will ‘sell’ the best in order to fit a decision already made. These argument are not meant to be balanced - they are poll-driven and appeal to people's basest fears and desires. The report says that, instead, policymakers should look at the all options and weigh the trade-offs for each. Because the truth is there are trade-offs – decision makers should not pretend there are silver bullets that will automatically bring cheap, clean, domestic energy to all.

In the report, I maintain that the proper way to address the debate about energy is to balance three main concerns:

1. Energy Security
2. Economic Stability
3. Environmental Sustainability

There are three broad categories of energy the U.S. has to choose from, including: fossil fuels, nuclear energy, and renewable power. Within each of those categories is a range of several choices.

Over the next few days, I will do a series of posts on my personal blog (http://andrew-holland.blogspot.com/) expanding on how each energy choice I brought up in the report matches up with the three main concerns above. In the meantime, I would encourage you to take ASP's online poll to show how you would prioritize America's Energy Choices, just click here.

Below the jump, the report is embedded.

Fuel Economy Increase Will Help National Security

While all of Washington is focused on the debt reduction talks, it does seem that there is some work actually happening. On Friday, the President is expected to announce a compromise between automakers and environmentalists.

According to the Wall Street Journal, who first reported this on Tuesday night, the President will announce that corporate average fuel economy (CAFE) standards will see a 5% average annual increase in fuel economy for cars and a 3.5% increase for light trucks, staring in 2016 and lasting through 2021. From 2021 until 2025 both would face a 5% annual increase. This builds upon the announcement of a new rule implemented last year that raised fuel economy standards from 2012 through 2016.

The result of this is that by 2025 - not that long when we're talking about the long lead-time necessary for designing and building cars - the average fuel economy will jump to 54.5 miles per gallon. That is approximately double what it was in 2010, the model year previous to the current one, of 27.5.

This is a big deal.

It is very important for American national security and foreign policy that we use less oil. First, it is important that the United States as a whole uses less oil because the sheer volume of oil imports harms American competitiveness and drives down the value of the dollar. The United States sends hundreds of billions of dollars overseas to pay for oil. The United States consumed over $1.45 trillion worth of oil in 2010, of which $680 billion was spent on imports.

Without these imports, the U.S. trade deficit, which was $497 billion in 2010, would not have existed. That capital could be used for investment at home, and the export of that capital had the effect of driving down the value of the dollar.

Second, it is important for each American consumer that they are less vulnerable to oil price fluctuations. Oil is a volatile commodity. Over the last four years alone, the global price of oil has fluctuated from an average price per barrel of $69 in 2007 to a peak of $147 in July 2008, back down below $35 in January 2009, then back up above $120 per barrel in April 2011. This constant fluctuation harms consumers because it impairs their ability to plan for the long-term by acting as an unplanned tax.

These problems directly impact the security of the United States because every person working on foreign policy knows how vulnerable the American economy and the American consumer are to the rising price of oil. That vulnerability constrains these decision-makers when dealing with oil-producing regimes. There is a good argument to be made (for another blog post) that the United States has acted very differently to Arab countries throughout the Arab Spring, depending on how much oil they produce.

The increases in CAFE standards that the President will announce tomorrow will put the United States on track to reducing its vulnerability to oil-producing regimes. This is an important step that should be applauded.

How to Assess America's Energy Choices

Cross-posted from the American Security Project's 'Flash Point'

On Tuesday, May 24, I participated in an ASP-sponsored event called “America’s Future Energy Choices.” This blog post is a summary of my presentation.

The United States is facing a series of choices over the next decade that will determine how its economy is powered to meet the needs of the 21st Century. By 2035, the total energy demand of the United States will rise by 20%, including a 30% increase in electricity demand. In addition, much of the aging power infrastructure will have to be retrofitted or replaced. All of this will happen in a world where total energy demand is expected to have risen by 50%. Inevitably, energy prices will rise because of the increased demand, and constrained supply. However, decision-makers in government and the private sector can not make decisions based on price alone. Depleting global resources, worries about climate change, and the impact of energy choices on national security will make the decisions about how the United States gets its energy much more difficult than the choices of the 20th Century. The government, utilities, and private sector of the United States should consider these decisions in lights of three concerns: (1) Energy Security, (2) Economic Stability, and (3) Environmental Sustainability. Sometimes these terms are simply buzzwords, so it is important that we specifically define each.

Energy Security

Energy Security is the ability for a country to act in its foreign and security policy independently of how it uses energy domestically. This should not be confused with the political term of ‘energy independence.’ In a world of globally traded commodities, it is neither possible nor even desirable to be energy independent. Instead, energy independence comes from energy flexibility and redundancy – so that the impact of supply shocks do not affect national security decisions. The United States’ foreign policy should be determined by its interests, not by its dependence.

An important caveat to this is that sometimes in Washington, talking about ‘Energy Security' has often been seen as way to sell climate change and environmental issues; the perception is that 'security' sells better than 'green'. However, that does a disservice to both. Considering Environmental Sustainability is important, but the decisions made could be completely different. For example, if you only considered Energy Security important, and ignored economic stability and environmental sustainability, it would make sense for the US to invest heavily in liquefying coal to drive our cars.

Economic Stability

It seems clear that all decisions about energy policy must consider price. The United States is one of the most energy intensive developed economies, which makes its economy vulnerable to supply-shocks. The unstated policy of the US government has clearly been to promote low prices, but the unintended result of that is there is little buffer against fluctuations in price – both up and down. Upward price shocks harm consumers by acting as a tax, but downward price shocks can harm producers as well by harming long-term investments.  Overall, it is more important for an energy choice to be made that will provide long-term economic stability rather than providing only for low-prices, especially if those prices tend to be volatile. Volatile prices encourage dependency when the price is low, leaving consumers harmed when the price spikes. Today, American drivers are feeling the pain of gasoline-dependency that years of low prices created.

Environmental Sustainability

Although there remains a deep and frustrating political divide in this country (and few others) about whether man-made emissions are causing the climate to change, the debate in the scientific community is no longer about whether humans are causing climate change, but how much those emissions are hurting. The most controversial debates among scientists are about the sensitivity of the climate to increased concentrations of greenhouse gases. Unfortunately, as much as the computer models try to quantify sensitivity, they are unable to.

Climate change has deep implications for energy policy/ The fossil fuels we us to produce 92% of America’s energy are the main driver of climate change. As the world’s second largest emitter, with about 25% of global greenhouse gas emissions, US reductions are important.

Local environmental changes are as important – or more – than global climate change. How energy production affects local water supplies and local air quality will determine how the public accepts new energy developments.

In conclusion, how America chooses to replace and expand its energy supply will affect the health of the world’s environment, America’s national security, and the well-being of the United States economy. The decisions made by government and the private sector over the next decade will set the path on the way to 2035. With those parameters in mind, I will be putting together a series of blog posts, both on ASP’s Flashpoint Blog and my own blog, which can be found on my blog at Andrew-Holland.com. I hope that it will draw some good comments.