The problems — and opportunities — with US energy policy
What is the overarching goal of United States energy policy?
Most of my colleagues in Washington would agree it’s to minimize energy cost and pollution, incentivize reliability and innovation, and—as much as possible—rely on domestic supply.
And yet, what we actually do is at odds with those goals.
Consider:
- In 2020, when oil prices were falling, former President Trump threatened to withhold military aid from the Saudi government unless they reduced production to raise energy prices. If our goal is to lower energy costs, why would we ever put pressure on the Saudis when prices are “too” low?
- The International Monetary Fund has calculated that the United States subsidizes the fossil fuel industry to the tune of $662 billion every year. The Inflation Reduction Act provides just under $400 billion in support of clean energy over 10 years.If our goal is to encourage innovation and clean energy, why do we spend more than 10 times as much in tax subsidies to protect dirtier, mature technologies?
- If you drill an oil well, you can take advantage of multiple tax credits designed to accelerate your investment and production from that well. If you also buy an electric vehicle you can get a tax credit to reduce U.S. oil demand. If we had a coherent energy policy, we wouldn’t simultaneously subsidize extraction and conservation.
The truth is that we’ve never had a coherent energy policy. In our early years as a nation we were long on resources and short on people so we created laws that expressly incentivized resource extraction — from forestry to mining. Those incentives created powerful special interests that fought to preserve those subsidies, even as we created (smaller) offsetting subsidies for conservation.
U.S. energy policy is like a taxpayer subsidized all-you-can eat buffet with a few coupons for diets and gym memberships at the register.
Our energy system consists of inputs and outputs. Inputs are things like coal, oil, sunshine, and wind — what we use to create energy but are of little use by themselves. Outputs are what we create with our inputs — the things that make our beer cold and our showers hot. Energy productivity is the value generated by selling those outputs based on the amount of inputs it took to create them. Countries with higher energy productivity create wealth by selling their outputs.
When comparing the wealth generated by select countries’ energy productivity, an alarming trend emerges:
- United Kingdom, $378.79 GDP per MMBtu*
- Germany, $312.50
- United States, $198.41
- Iraq, $177.30
- Saudi Arabia, $163.13
(*Million metric British Thermal Units. Figures shown are from the pre-COVID year of 2019)
It makes sense that modern, services-based economies like Germany and the United Kingdom would maximize energy productivity, just as it makes sense that extractive, resource-based economies like Saudi Arabia and Iraq would do the opposite. It is only the inconsistency of U.S. energy policy that has caused us to look more like the latter.
But let’s not see this as a cause for depression. Let’s take it instead as a call to action — because there is great optimism in this data. There are no technology-, capital- nor talent-based limitations on our ability to reduce CO2 emissions, reduce our exposure to volatile fossil energy markets, reduce the wealth flowing to petro-state dictators AND grow our economy. Given the option to have our cake and eat it, we don’t have to figure out how to get China to act with us; we can simply act and leave their economy in the dust if they don’t catch up.
We have the opportunity before us to grow and decarbonize our economy. To show the world that’s possible. To lead. We can start by eliminating fossil fuel subsidies, fixing our permitting process to remove the barriers to clean energy, reforming our energy markets to remove disincentives to conservation… and so much more.
The choice before us is simply whether we want to get rich on a healthy, sustainable planet, or keep paying people to dig holes in our backyard. That shouldn’t be a hard choice.
By: Rep. Sean Casten
Source: The Hill