Do No Harm

The Senate and House of Representatives are both feverishly working on new federal energy legislation, and it's a reasonable bet that a bill will end up on the President's desk within a few months. However, it is still anyone's guess as to precisely what provisions will survive or be added along the way, as the process converges toward an eventual conference to iron out differences between the two bodies' differing energy visions. As the final legislation takes shape, however, we can only hope that our elected representatives will see the wisdom of adopting the credo of at least doing no harm. The potential for wasteful and counterproductive energy policy is enormous, particularly in two areas: the functioning of the petroleum products market and the promotion of alternative fuels.

The API ran a full page ad in today's Washington Post with a tag line of, "It's 2007, not 1977." That echoes a theme I've expounded here for several years. Many of the measures introduced to deal with the energy crisis of the 1970s were either ineffective or downright harmful. We should have learned from that experience, and from the much more successful market-oriented approaches of the subsequent decades. While fuel prices may be high again, we have seen none of the incredibly disruptive gas lines and runouts that plagued us then. In particular, the "anti-gouging" provisions espoused by some in Congress look like standby price controls, aimed at the point in time when the ability of the market to rebalance supply and demand is most essential, as we saw after the hurricanes of 2005. This idea clearly fails the "do no harm" test.

Turning to alternative fuels, it's rare that I agree with the editors of The New York Times on energy policies, but their editorial of May 30th on the impact of coal liquefaction on energy security and climate change was spot on. "A policy designed to solve one problem should not make the other worse," they said, citing the high greenhouse gas emissions associated with coal-to-liquids (CTL) plants. A recent posting on the Clean Car Congress site provides useful supporting data from a Carnegie-Mellon study comparing CTL, conventional fuels, and plug-in hybrids.

So in this regard, it is one thing to codify a greatly increased biofuels mandate that relies on production from unproven cellulosic ethanol technology to meet its long-term goals, but quite another to turn the understandable ambitions of coal-state legislators into a national policy that would double down our bet on the equally unproven technology of carbon capture and sequestration (CCS.) Even if cellulosic ethanol didn't take off as expected, we would still end up with liquid fuels that--however costly at the pump and the supermarket--could reduce both our oil imports and our greenhouse gas emissions by modest amounts. However, if we went ahead with CTL, but CCS proved either ineffective or uneconomical, we'd end up with a synthetic fuels industry that would roughly double our greenhouse gas emissions per gallon of gasoline or diesel. That would make a farce of any national effort to reduce those emissions via cap-and-trade or some other mechanism.

If we are indeed headed for a "grand compromise" on energy that would incorporate meaningful elements of energy efficiency and conventional and alternative energy supply, then those crafting a compromise must hold firm in excluding provisions that would sabotage either the ability of the fuel marketplace to respond to sudden shocks, or our first steps toward reducing our enormous greenhouse gas emissions. In the give-and-take world of Capitol Hill that won't be easy.