Saturday, April 23, 2011

How Bipartisan Efforts Increased Energy Efficiency and American Competitiveness

It is incredible that energy policy today is a partisan issue when, just six years ago, a bipartisan consensus resulted in one of the most powerful pieces of energy efficiency legislation ever. Legislation that continues to bring down the energy intensity of the US economy.

A new report by the American Council from an Energy Efficient Economy (ACEEE) analyzes the Energy Policy Act of 2005. The report is entitled Assessing the Harvest: Implementation of the Energy Efficiency Provisions in the Energy Policy Act of 2005. It concludes that this legislation expanded markets for money-saving energy-efficient products and created opportunities for continued bipartisan political action on energy efficiency in later legislation.

The Energy Policy Act of 2005, signed by President George W. Bush, included manufacturer and consumer tax incentives for energy-saving technologies, minimum efficiency standards for appliances and equipment, and a variety of other provisions to encourage energy savings. It was the first major energy legislation since 1992, and began a period of bold energy efficiency legislation from 2005 to 2010.

The most successful energy efficiency provisions had good timing, stakeholder engagement and education, and appropriate levels of funding. "The new homes and appliance manufacturer tax incentives, and the appliance and equipment standards have succeeded the best at transforming markets," said Rachel Gold, lead report author and a researcher at ACEEE. Other provisions, especially those with limited or nonexistent funding or where a loophole was built into the law did not fare as well.

Among the lessons learned, the report notes that education and stakeholder engagement are critical to the success of energy efficiency programs. It also points out that legislation must take into account market conditions and barriers to product acceptance in order to shape effective policy.

The report estimates that, in 2020, the Energy Policy Act of 2005 will still be saving enough energy to power the entire state of Tennessee for a full year at current energy use levels. This type of efficiency is essential not only to protect the environment, but to maintain a competitive economy. As energy costs increase due to a wide range of factors from growing demand from China and India to instability in the Middle East, economies with the lowest energy intensity -- amount of energy required to produce a dollar of GDP -- will have a competitive advantage.

John Howley
Woodbridge, New Jersey

Wednesday, April 20, 2011

The "Foreign Oil" vs "Domestic Oil" Fallacy

President Obama may have thought he was appealing to patriotic instincts, but his speech at Georgetown University sent the wrong message by promoting the fallacy that we can save our economy by driling for more "domestic oil" to reduce our dependence on "foreign oil."

Webster's defines a "fallacy" as "an often plausible argument using false or invalid inference." That is exactly what our elected officials are selling us. President Obama's argument that we can reduce our dependence on foreign oil by drilling in the the Gulf is plausible, as is Republican Senator Mitch McConnell's retort that even more oil could be produced by drilling in Alaska. The false inference is that drilling for more domestic oil will somehow end the cycles of energy crises that have triggered economic recessions since the 1970's.

Here are the facts:

More domestic crude oil will not shield us from higher and more erratic oil prices in global markets. Most of our imported oil comes from Canada and Mexico. We do not import any meaningful quantities from Tunisia, Egypt or Libya. Yet, the oil we buy from Canada and Mexico also costs more than $100 per barrel, just like the oil from countries in turmoil. Because oil prices are set by a global market. Even if we drill for more oil in the US, the price of all our oil will be determined by OPEC, increasing demand from China and other developing countries, and instability in the Middle East. [After this post first appeared, some readers pointed out that reducing foreign oil imports will help reduce the balance of trade deficit. True, but getting there by producing more domestic crude is not the solution, for reasons explained below.]

More domestic crude oil will not decrease environmental harms. Whether we burn domestic or foreign oil, the impact on the environment is the same. Indeed, more drilling in the US will result in more environmental harms, not less. Remember that the BP Deepwater Horizon and the Exxon Valdez catastrophes were the direct result of domestic oil production. Expect even more of these types of disasters as domestic oil production expands into environmentally sensitive areas, especially when the multinational oil industry wraps itself in our flag and argues for more lenient regulations in the name of reducing our dependence on "foreign" oil.

More domestic crude oil will not increase the supply of domestic gasoline, diesel, or other refined products. Our US refineries have been operating at 85% to 90% capacity throughout the Great Recession. This is very close to full capacity because refineries must shut down periodically for maintenance and safety reasons. That is why nearly 25% of our oil imports are in the form of refined products. We do not have the capacity in the US to refine more crude oil into useful products. Even if we produce more oil from domestic sources to replace "foreign oil," that will not result in more refined products in the US market. As the economy recovers and demand increases, we will need to import even more refined products from foreign countries.

More domestic crude oil will not make us more competitive with China, India, and Europe. Markets in the rest of the world are shifting to sustainable energy. Germany is getting almost 20% of its energy from renewable sources right now. GE just bought a French technology company and anticipates creating large numbers of renewable energy jobs in Europe where government policies favor sustainable energy. China is outpacing us in sustainable energy investments. In the short run, these countries are creating new jobs in new industries. In the long run, they will have less expensive sources of energy.

President Obama's embrace of more domestic oil production as the solution to "foreign oil" is tragic on many levels. It resulted in news headlines that distracted citizens from many other initiatives that he has promoted to wean the US from oil, domestic or foreign. It weakened him politically by damping the enthusiasm of environmentalists and others on the left who are his natural base, while emboldening those who support dirty fuels. At the same time, he sent a confusing message to vast numbers of independent voters by suggesting that the dirty energy advocates have a legitimate argument when they say that drilling for more domestic oil is a solution. That lets his critics avoid the very tough question of how we will wean ourselves from dirty fuels.

Most tragically, the President's willingness to promote domestic oil as a solution to "foreign oil" appears to represent an abandonment of the one thing that will ultimately help us move to a more sustainable energy infrastructure -- using government policy to change the economics of energy. If we really want to build a sustainable energy infrastructure, we should start by: (a) phasing out all direct and indirect government subsidies for dirty fuels over a seven-year period; and (b) including the cost of pollution and related harms to human health in the price of dirty fuels. Not only would that spur investment in clean energy technologies, but it would also reduce the government deficit and the trade deficit.

John Howley

Woodbridge, New Jersey

Thursday, April 14, 2011

A Grandmother's Rant About the Good, Green Ol' Days

My mother, the grandmother of eight grandchildren, periodically includes me when she sends around emails to her friends. Her latest missive is about an unknown grandmother accused of not living a green and sustainable life. If you can look beyond the sarcasm and hyperbole, you'll find some thought-provoking kernels of truth. Here it is:

A Grandmother's Rant About the Good, Green Ol' Days

In the line at the store, the cashier told the older woman that she should bring her own grocery bag because plastic bags weren't good for the environment. The woman apologized to him and explained, "We didn't have the green thing back in my day."

The clerk responded, "That's our problem today. The former generation did not care enough to save our environment." He was right, that generation didn't have the green thing in its day. Back then, they returned their milk bottles, soda bottles and beer bottles to the store. The store sent them back to the plant to be washed and sterilized and refilled, so it could use the same bottles over and over. So they really were recycled. But they didn't have the green thing back in that customer's day.

In her day, they walked up stairs, because they didn't have an escalator in every store and office building. They walked to the grocery store and didn't climb into a 300-horsepower machine every time they had to go two blocks. But she was right. They didn't have the green thing in her day.

Back then, they washed the baby's diapers because they didn't have the throw-away kind. They dried clothes on a line, not in an energy gobbling machine burning up 220 volts -- wind and solar power really did dry the clothes. Kids got hand-me-down clothes from their brothers or sisters, not always brand-new clothing. But that old lady is right; they didn't have the green thing back in her day.

Back then, they had one TV, or radio, in the house -- not a TV in every room. And the TV had a small screen the size of a handkerchief, not a screen the size of the state of Montana. In the kitchen, they blended and stirred by hand because they didn't have electric machines to do everything for you.

When they packaged a fragile item to send in the mail, they used a wadded up old newspaper to cushion it, not Styrofoam or plastic bubble wrap. Back then, they didn't fire up an engine and burn gasoline just to cut the lawn. They used a push mower that ran on human power. They exercised by -- this is the Honest-to-God Truth! -- working so they didn't need to go to a health club to run on treadmills that operate on electricity. But she's right; they didn't have the green thing back then.

They drank from a fountain when they were thirsty instead of using a cup or a plastic bottle every time they had a drink of water. They refilled their writing pens with ink instead of buying a new pen, and they replaced the razor blades in a razor instead of throwing away the whole razor just because the blade got dull. But they didn't have the green thing back then.

Back then, people took the streetcar or a bus and kids rode their bikes to school or rode the school bus instead of turning their moms into a 24-hour taxi service. They had one electrical outlet in a room, not an entire bank of sockets to power a dozen appliances. And they didn't need a computerized gadget to receive a signal beamed from satellites 2,000 miles out in space in order to find the nearest pizza joint.

But isn't it sad? The current generation laments how wasteful the old folks were just because they didn't have the green thing back then?

(If anyone knows the author, please let me know so I can give them appropriate recognition.)

John Howley