Wednesday, June 15, 2005

What Might Have Been (Reprise)
Since many of the energy options available to us, including next-generation nuclear power plants, LNG import terminals, and even wind and solar power, have drawbacks that many among us find unpalatable, greater efficiency remains as an important option. However, as I pointed out in this posting from last October, the end result might not be quite what we'd expect.

Several weeks ago, the New York Times printed an article comparing US and French energy policies and energy efficiency over the last several decades. The article was subsequently picked up by the International Herald Tribune, from which this reprint was taken. While interesting in its own right, I think it also provides a fascinating glimpse of a world that might have been, had energy efficiency remained a core value of this country after the resolution of the oil crises of the 1970s.

In fact, such a world is not entirely fanciful, since many commentators have suggested that the US should have imposed high gasoline taxes in the aftermath of 9/11, in order to wean the country off imported oil and to dry up the ultimate funding source for many terrorist groups.

Using France as a proxy for a more energy-efficient USA, we can draw some interesting conclusions. For example, from 1971 to 2001, oil's share of total energy in France dropped from roughly 2/3 to just over 1/3, with nuclear power taking up most of the slack. Over the same period, oil reliance in the US dropped from about 48% to 40%. Had the US followed the French pattern, even if the energy alternatives chosen were different, we would today use about 5 million barrels per day less oil than we do, and our oil imports about would be roughly half of the current 10 million barrels per day.

The intervening 30 years would have looked very different. Among other things, the SUV trend would probably never have happened--with signficant consequences for US carmakers--and we would be driving smaller, less powerful cars. We might even be living in smaller homes, watching smaller TVs, and so on. On a larger scale, the geopolitical implications might have been dramatic, too, including a different relationship with the Middle East.

There's a catch, of course. Over the last 30 years, a side-by-side comparison of the French and US economies (using OECD data) shows that ours grew by an additional 20% of GDP, creating more jobs and greater wealth in the process. While there are complex reasons for this, setting an artifically high value on energy in France, compared with its real-world cost, in this period no doubt contributed to the difference in performance. ( Persistent high unemployment also seems to have been a key factor in the recent French "no" vote on the EU constitution.)

Hardly anyone doubts that the US could become much more energy efficient if we chose--or had to--but we should keep in mind that we would also be choosing a different economy, with different outcomes, some better and some worse.

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