Financial Crisis Demands Swift Attention — to Energy Policy

Posted November 18, 2008 at 3:58pm

Now that the work of campaigning is over, the work of governing must begin. Faced with a long list of issues to address, many may be wondering where to begin. But if we are interested in helping our economy, creating jobs, strengthening our national security and helping Americans keep more of their money in their pockets, energy reform can’t wait.

[IMGCAP(1)]In the wake of the nation’s financial crisis, energy reform may now seem like a secondary issue, but the task of reforming our nation’s energy policies should not be done in spite of our financial crisis — it should be done because of our financial crisis.

Our current financial crisis has been marked by instability in our markets, and that instability will continue if we fail to enact prudent energy policies with the sense of urgency that this moment in time deserves. The several boom-and-bust cycles that have become hallmarks of our energy marketplace over the past 40 years have always had a noticeable impact on our economy. video platform video management video solutions free video player

Spikes in energy prices raise the cost of consumer goods, transportation and food, which leads people to spend less. Temporary dips in energy prices infuse our nation with a complacency that weakens the national will to do what is needed.

Over the past two months, the decline in oil prices and gasoline prices has once again relegated energy issues to the backseat of the public policy arena. We cannot afford to leave them there.

Indeed, recent reductions in oil prices do not mean that world energy markets are stabilizing — actually it means the opposite. Consider that within a one-year period, oil prices have increased from roughly $70 per barrel to nearly $150 per barrel, before retreating less than $70 per barrel. We can be certain of one thing — the most recent reductions in oil prices are temporary, and the Organization of Petroleum Exporting Countries has already indicated that it may reduce production again, which could increase prices.

But beyond oil and gas prices, even the most optimistic among us must concede that the United States is poorly positioned to meet our present and future energy challenges.

Historically, we have taken a short-sighted view toward increasing our energy supply. For example, we are not investing sufficiently in groundbreaking technologies such as biofuels, clean coal, solar and wind.

Our dependence on foreign sources of energy is growing. Over the past 35 years, we have increased our imports of oil from abroad from 30 percent to more than 60 percent.

Our energy infrastructure is also aging rapidly and is not being replaced or modernized. Because of “not in my backyard” sentiments, the construction and expansion of everything from power lines to power plants has been delayed, canceled or mired in the endless legal obscurities of “process.”

This combination of factors paints a very grim picture for our future, unless we take quick and decisive action.

Our nation’s energy crisis and financial crisis are similar in scope and impact, yet addressing both will require very different approaches. With the financial crisis, the solutions have relied on vast amounts of government financing, regulation and control. With the energy crisis, the solutions must rely on greater partnership and cooperation between the government and private sector. That means allowing the government and the private sector to focus on the things that they can do best.

For example, the federal government has an important role in supporting and incentivizing research into new and experimental technologies that might not otherwise draw support from the private sector.

But we must also be mindful that there are areas where government intervention can set the process back, rather than move it forward. Proposals that sound good on the surface often have unintended consequences. Clearly, though the need for reform is urgent, we must proceed with caution.

As an example, the biofuels mandate was intended to promote alternative, domestically supplied fuels, but it had the unintended consequence of increasing prices for fuel and food. Similarly, proposals to levy “special taxes” could reduce domestic energy exploration, decrease research and development, and ultimately increase energy prices. Rash proposals on climate change that could bankrupt industries and send utility bills skyrocketing must be avoided. Thoughtful bipartisan consultations, for the good of the nation, are what is required.

To enact meaningful energy reforms, we will need to agree on a comprehensive plan with achievable goals and timetables. Last week, our Institute for 21st Century Energy unveiled such a plan.

The plan has some unique qualities, and it suggests several recommended steps for our new leadership to consider. It also provides a timeline that prioritizes the issues requiring the most immediate attention while detailing those issues that must be addressed henceforth.

Among other things, the plan suggests consideration of repealing existing laws and permanently ending the remaining moratoria that prevent production of domestic energy resources as well as an expansion of leasing for oil and gas production. It also suggests increasing research and development spending on nonemitting energy sources such as renewables and clean coal, and recommends putting these funding levels on a path to double within five years.

Over the first six months of next year, we recommend taking steps that will create a renaissance in nuclear power in the United States. This should include expanding the loan guarantee program so that it covers a greater number of nuclear plants, ensuring adequate funding for the Nuclear Regulatory Commission and reaching a long-term solution for disposal of our nuclear waste, which must include domestic recycling.

Within a year it should be possible to produce comprehensive energy legislation that promotes energy efficiency across all energy sectors, increases and diversifies energy supplies, reduces environmental impacts, and modernizes and protects our nation’s energy infrastructure.

These steps are just a few components of our comprehensive plan. The plan is available in its entirety on the institute’s Web site: energyxxi.org.

However, central to this plan is the belief that the United States doesn’t just need more government action, it needs smart government action. So with each step taken on energy reform, our new leadership must ask themselves some of the following questions.

How will we measure success of energy reform? What are the indicators that will define success or failure? Are they decreasing our dependence on foreign sources of energy? Are they lowering costs for consumers? Are we increasing the diversity of our energy sector?

How much will these actions collectively cost our nation, both the government and the people? Will they lower the costs of fuel and consumer goods? How will we participate and lead in solving global energy and climate challenges?

How will our actions impact the environment? Are we investing in nuclear power and technologies such as clean coal, the combination of which should reduce our emissions of greenhouse gases and increase our own domestic energy supplies?

These questions are just a start, but they underscore the need for careful thought with regard to future actions on energy reform. With new leadership comes opportunities and expectations for real and lasting change. Clearly, the public demands a new direction with regard to energy.

With the right strategy, we can turn the nation’s energy challenges into energy opportunities. Unleashing American ingenuity and resources can create a competitive energy marketplace that stimulates economic activity and creates jobs. It will also help in restoring our image as a nation that can lead the world positively on an issue of global importance.

If adopted and accompanied by a favorable investment climate and technology advancements, we hope our proposals contribute to putting the United States on a long-term path to a secure, prosperous and clean energy future.

Gen. James L. Jones served as supreme allied commander in Europe and commandant of the Marine Corps. He is president and chief executive officer of the Institute for 21st Century Energy.