Specifying the Path vs. Choosing the Outcome
I'm struck by an unlikely analogy between the space program and alternative energy development. Consider the current plight of the US space shuttle. In spite of some intrepid inflight repairs, and assuming a safe landing by Discovery, the program will be hung up again with technical problems while engineers try to reconfigure the fuel tank insulation. Compare this to Russia's venerable Soyuz, whose managers brashly offered to throw together enough ships to rescue Discovery's crew, should that become necessary. The single-use Soyuz fleet has flown for 40 years--with some upgrades--and has had an exemplary safety record since the early 1970s.

Superficially, this resembles a classic tortoise-and-hare competition. Fundamentally, though, these two vehicles reflect the answers to two very different questions. Soyuz responds to a simple query: Can you build an inexpensive, reliable craft to carry humans to earth orbit and return them home? The Shuttle, on the other hand--for reasons related as much to Cold War strategic needs as to the scientific and technical goals that NASA was established to pursue--addresses a much more exacting specification, along the lines of: Can you build a reusable spacecraft to carry crew and large quantities of cargo and instruments to low earth orbit, loiter in orbit for extended periods, and return to earth and land like an airplane? The result is an infinitely more complex machine that has proven much more expensive and much less reliable than originally expected.

Now think about the US approach to our energy goals. The Energy Bill that awaits President Bush's signature includes funding for incentives and research that are fairly narrowly specified. There's money for coal gasification, for increased ethanol production, for incentives to induce consumers to buy hybrid cars, and so on. This money will get spent, and it will produce many of the intended results. But how will those results compare with the what we'd get if instead of specifying the path, it simply stated the desired outcome?

Instead of incentives for hybrid cars, for example, we could have had incentives based on graduated increments of gas mileage above the Corporate Average Fuel Economy standards. This could even have been made revenue-neutral by taxing cars getting equivalent increments of gas mileage below the CAFEs, all without changing CAFE. The result would reward efficient hybrids like the Toyota Prius or Ford Escape Hybrid, as well as efficient conventional cars like the Chevy Aveo or VW Jetta diesel, while treating hybrids like the Lexus RX400h as what they are, lifestyle choices that don't reduce fuel economy in a meaningful way. And with this kind of approach, we wouldn't have needed a separate category of incentives for fuel cell cars, as we will now have. Rather, the reward for an ultra-efficient car could have been set ultra-high, and any technology that would get us there would qualify. And that is my point in a nutshell.

The same issue came up in a conversation with a close friend in D.C. concerning coal gasification. She rightly pointed out that the answer to cleaner coal is not necessarily gasification--though I think it probably is. Rather, the answer is to specify what we mean by "clean coal" and to fund and reward anything that delivers on that. Imagine the entrepreneurial energy that would be unleashed if a portion of the money earmarked for specific line items in the Energy Bill were diverted to fund the energy equivalent of the X-Prize. It may not be good politics, but it would be very sound economics.