by Mitt Romney
Cold fusion looked like it was the answer . . . for a couple of weeks in 1989. And today, many are enthusiastic that we will soon be powering our automobiles with cellulosic ethanol—liquid fuel derived from trees, woody plants, and switchgrass. I fully agree that we need to pursue every promising new source of clean energy, but it is irresponsible to act as if one or more energy miracles wait around the corner. After all, we’ve been looking for replacements for oil, coal, and nuclear fuel for decades. It would be unwise to rest our future security on the blithe assumption that we will be more successful in the next thirty years than we have been in the last thirty.
Addressing Demand and Supply
Our energy strategy must address both the demand and the supply sides of the equation. We need to lower the amount of energy we use and increase the supply of domestic energy sources.
Americans use a lot of energy. We own more cars per capita than any other country in the world. Many are fuel inefficient. And in part because ours is a big country, we drive our cars long distances. Our homes are large, and we heat and cool them to keep the temperature within a narrow range. Televisions, computers, home appliances, and lighting account for another big portion of our overall energy use, and there are many indirect uses as well—the energy required by to produce our food, homes, clothing, entertainment, and communications among them. When it’s added up, each of us uses about twice as much energy as a European or Japanese citizen, and seven times as much as the average Chinese. One would expect, therefore, that we could find ample opportunities for greater efficiency and reduction in use.
Better auto mileage is where most people look first. In 1975, Congress enacted Corporate Average Fuel Economy (CAFE) standards for new cars and light trucks, and a decade later, new auto mileage had more than doubled, from 12.9 miles per gallon (mpg) to 27.5. But in the twenty-five years since, there’s been virtually no improvement. In fact, with the big growth in SUVs and pickups, the average mileage of all new passenger vehicles has declined over the last two decades. Early in 2008, as the price of a gallon of gasoline exceeded four dollars a gallon, average mileage statistics spiked as consumers fled from SUVs and other low-mileage vehicles, but it remains important for us to improve mileage standards without depending on oil-nation profiteering.
The National Petroleum Institute calculates that the national average mpg can double in twenty years simply by applying today’s proven and nearly proven technologies—with no need to reduce automobile weight, power, or accessories. Because cars in general have grown heavier and more powerful over the past two decades, if consumers support modest changes in vehicle size and acceleration levels, average auto mileage of 50 mpg appears entirely within reach. Japan already mandates that average new car mileage reach 46.9 mpg in just six years, and Europe mandates 48.9 mpg even sooner.
Some energy experts believe that even mileage targets like these are too conservative. Amory Lovins is one of them. When I was governor, he and I met in my office in Boston. Lovins, head of the Rocky Mountain Institute, shared his vision of a 75 mpg hybrid automobile built with high strength steel and composites. Further, he described a car with aerodynamic design features that would reduce its weight enough to make hydrogen fuel cells practical as its power source. At the heart of his analysis were his calculations of the efficiency of our current automobiles. About 85 percent of an auto’s energy is lost as heat and friction in the engine and transmission, he explained. The remaining 15 percent moves the car, which weighs about three thousand pounds, and most often transports only a single occupant. Doing the math, Lovins concluded that only 1 percent of the car’s energy moves the driver down the road—the rest is inefficiently consumed in moving the car.
I shared my own dream for a super-efficient commuter vehicle. It would be a lightweight, two-passenger car in which the occupants rode tandem—one behind the other instead of side by side. These much narrower vehicles would allow for the addition of more highway lanes at very little cost, reducing traffic and commuting times. I tried out my idea on Brian Schweitzer, Montana’s no-nonsense governor. Mitt, you’d be real smart not to ever mention that again, he said to me with a slight smile. People will think you’ve lost it.
But putting aside the fanciful, the issue isn’t whether our current technologies can produce cars with very high mileage—it’s how to get them to market and out on the road. The oil shocks of 1973 and 2008 demonstrated that Americans will quickly and dramatically change buying and driving behavior when gasoline is scarce or prohibitively expensive. But sudden shocks devastate family budgets and can trigger job-destroying recessions. We need predictability and gradual change, not a roller-coaster ride.
The approach government has employed to date is to impose federal fuel economy standards on auto manufacturers. CAFE requirements did indeed improve mileage, but they led to some harmful side effects as well. Asian manufacturers that were already producing a full line of smaller, fuel-efficient vehicles suddenly had a significant advantage over U.S. automakers. Both foreign and domestic companies also gamed the system, shifting the mix of vehicles in their fleets to produce more minivans, pickups, and SUVs, which carried less stringent standards. While the revised CAFE standards passed in 2009 will eliminate much of the gaming, they will give foreign companies the same kind of boost they got when CAFE was first introduced, and they will impose a large financial burden on domestic automakers at a time when they are least able to afford it. My guess is that taxpayers will end up with the bill for government subsidies to the industry, probably totaling 100 billion.
Doug Foy, former president of the Conservation Law Foundation and recipient of the President’s Environmental and Conservation Challenge Award, is a proponent of an idea he calls a feebate. Under his plan, auto buyers who choose to purchase a fuel-efficient car would get a significant government rebate check. But conversely, buyers who chose a fuel-inefficient auto would pay a fee. Since the rebates the government paid out would equal the fees collected, government spending would be unaffected and incentives would be put in place that favored greater fuel efficiency. The amount of each feebate would vary from a few hundred dollars to a few thousand, based on the vehicle’s mileage compared with others cars in its class. And the feebates would also be adjusted for size, so you wouldn’t be penalized for buying a seven-passenger van, only for buying a seven-passenger van that was less fuel-efficient than its in-class competition.
I liked Foy’s idea enough that I proposed a similar but more palatable plan during my tenure as governor. Instead of adding fees, I proposed lowering or eliminating the sales tax when an individual purchased a fuel-efficient vehicle in a given class. I also proposed an additional tax break based on how much of the vehicle’s labor and materials came from the United States. Under my plan, the sales tax savings on a new car purchase could amount to 2,000 or more. The measure didn’t pass, but it should have.
It’s Not Just Cars
Automotive fuel economy can be dramatically improved and doing so will reduce our vulnerability to foreign sources of oil. The bad news is that automobiles and light trucks account for well less than half of our overall oil consumption. When you consider the energy we consume from all sources—coal, gas, oil, and alternatives—passenger vehicles are responsible for only 16 percent of the total. If we want to achieve energy security, we can’t look just to our cars.
The majority of U.S. oil consumption is by heavy trucks, airplanes, homeowners, manufacturers, and companies that produce products such as plastics, cement, and chemicals. The list of the consumers of all types of energy is as broad as the economy is diverse. So how can we achieve substantially greater energy efficiency if it means changing the habits of thousands of types of users in thousands of settings rather than just those of automobile drivers?
McKinsey & Company conducted a study in 2009 to determine how much the emission of global greenhouse gases could be reduced worldwide and at what cost. Because greenhouse gas emissions are highly correlated with energy cons
umption, the study provides a window on the opportunities for energy efficiency and fuel substitution as well. The firm set out to determine whether enough greenhouse-gas-reduction opportunities exist to limit the increase in the world’s average temperature to two degrees Celsius. They evaluated the abatement potential and the costs for more than two hundred different abatement opportunities. On page 238 is a bar chart illustrating the summary findings of the study, with each bar representing one, or in some cases, a group of opportunities. The width of each bar indicates the potential greenhouse gas emissions reduction that each opportunity can achieve by 2030 if exploited to its fullest—the wider the bar, the higher the impact. The height of the bar indicates whether, over its lifetime, the opportunity will result in annual savings (bars below the baseline) or annual costs (bars above it).
Like the authors of the study, I was struck by a number of its findings; foremost is that achieving the study’s temperature objective would require a very wide range of measures and investments—none of which is so large that we could afford to concentrate on it alone. Second, the opportunities that save money (the bars below the line) tend to involve energy efficiency measures while fuel-substitution measures like nuclear and particularly wind and solar power are much more costly. The same holds true for a no-regrets policy for energy security: it will require actions from a multitude of users and a multitude of technologies, some that will pay for themselves and some that will not. There is no one silver bullet.
Gobal greenhouse gas abatement cost curve beyond business as usual–2030
Note: The curve presents an estimate of the maximum potential of all technical GHG abatement measures below 60 per +CO2 if each lever was pursued aggressively. It is not a forecast of what role different abatement measures and technologies will play.
Source: McKinsey & Company
As part of its effort to stimulate energy efficiency and fuel substitution, the federal government to date has employed mandates like CAFE, product energy standards for home appliances, and subsidies such as home-insulation tax credits. While all of these measures do in fact stimulate energy savings, they are far from sufficient for us to reach the goal of energy security. Government simply can’t identify—let alone effectively regulate, mandate, and subsidize—all the energy consumption and energy users in the American economy. True energy security will require game-changing measures that will lead users of all kinds to voluntarily and independently make energy-investment and energy-consumption modifications based upon their individual economic self-interest. Determining which measures are needed depends in part on the extent of the opportunities for replacing foreign oil with domestic sources and for exploiting new fuels and energy sources.
Alternatives to Foreign Oil
Whether global warming or energy security is one’s primary concern, everyone agrees that finding substitute fuels for oil is a good thing. Oil is what makes us most vulnerable economically and oil accounts for 44 percent of our carbon dioxide emissions. Both camps also agree that we should exploit renewable energy sources like wind, solar, and agriculture-based fuels, as well as maximize energy opportunities from cogeneration—which is the simultaneous production of heat and electricity from a single-fuel source. When it comes to nuclear power, coal, and increased domestic drilling, the agreement disappears.
Nuclear power is a win-win; it’s a domestic energy source with zero greenhouse gas emissions. The McKinsey analysis determined that nuclear power poses the single largest opportunity to reduce global greenhouse gas emissions. Without increased nuclear generation, the same study predicts global temperatures cannot achieve the two-degree Celsius goal. So if you’re serious about global warming, you have to say yes to nuclear; and if like me you’re serious about energy security, you get to the same place.
I confess that I don’t understand why some environmental activists still consider nuclear power such a boogeyman. They should consider the contemporary evidence—the United States now has 104 trouble-free nuclear reactors at sixty-five power plants. France gets 80 percent of its electrical power from nuclear generations. Nations all over the world are currently building new plants, and scores of naval vessels have been safely and efficiently running on nuclear power for decades. Vermont, the state which many consider to be the greenest in the country, gets 73 percent of its power from nuclear power. Nuclear generation has a safe and economic track record, and it is here to stay.
Some argue that nuclear power has no prospects in market-driven energy systems for a simple reason: nuclear plants cost too much to build . . . electricity from new light-water reactors will cost twice as much as from new wind-farms. This argument would be more persuasive if Argentina, Canada, China, Finland, France, India, Japan, Pakistan, Russia, South Korea, the United Kingdom, and other nations didn’t have a total of forty-eight new nuclear reactors under construction as of the summer of 2009. Can all of those countries be pursuing energy solutions that make no economic sense?
Here in the United States, governments insist on interminable permitting, regulatory, and legal delays to deter the construction of new nuclear power plants; that’s what has made them economically infeasible. Update the regulations and nuclear will take off. The potential market for new nuclear reactors and the services necessary to keep them running is so large that the private sector is already beginning to expand, argue the Heritage Foundation’s Jack Spencer and Nicolas Loris, who are convinced that government subsidies of nuclear generation aren’t needed to make nuclear energy viable in this country again. They believe nuclear power makes economic sense right now and does so entirely on its own.
I think there is actually a simple way to resolve this disagreement. Why don’t we retool governmental regulatory processes so that they solely provide for safety rather than giving professional anti-nuclear activists a set of labyrinthine regulations and tools with which to block new construction? If nuclear power proves to be economically viable, new plants will be built.
I don’t dismiss the concerns of people who object to nuclear power out of a concern for a terrorist attack or accident—even given the industry’s track record in the United States and around the world. Each of us must make our own calculations of acceptable risk as we line up for or against nuclear power. But in my view, the risk to liberty, prosperity, and human life is greater due to our dependence on foreign oil than it is when we build nuclear power plants.
Neither can we ignore coal as a substitute for foreign oil. Coal currently provides 48 percent of our electricity and 23 percent of our total energy. The United States has the largest coal reserves in the world, reserves that we can count on for the next 200 to 300 years. In addition to being used to generate electricity, coal can be liquefied and used as a transportation fuel. For those who see energy security as the primary goal of our energy policy, coal is an obvious answer. For those who are also concerned about warming, the challenge is that coal is one of the largest emitters of greenhouse gases of all energy sources.
We could overcome the challenge if we were able to capture the carbon dioxide from coal and store it away. Technology to do so already exists—the coal capture and storage process is currently being employed in a small coal gasification plant in Beulah, North Dakota, which sends the carbon dioxide it emits not into the air but into a pipeline that travels north to Canada, where some of it is used for enhanced oil recovery and the rest is stored underground. Whether carbon dioxide from coal can be captured and stored by larger commercial facilities remains to be seen, but surely research and development of this technology should become a high priority for us and for other nations with large coal reserves like China, Russia, and the United Kingdom.
Natural gas is an energy source everyone can love. It is abundant domestically, it can substitute for oil in a number of applications, and it emits very little greenhouse gas. Recently developed horizontal-drilling technology has transformed the natural gas industry by multiplying the amount of gas that can be extracted from old and new wells. Shale
gas that is abundant in North America is less costly to produce than oil, coal, and most other forms of energy. As vast new reserves are being opened, natural gas has suddenly become the most promising immediate oil substitute, as well as a much larger contributor to our overall energy requirements. America should be building gas pipelines as quickly as possible.
Expanding the domestic drilling for oil is a highly charged issue largely because of its environmental implications. The best opportunities for finding important new fields are in pristine areas off our coasts, mountain-state wilderness areas, and in Alaska’s Arctic National Wildlife Refuge. The U.S. Department of the Interior estimates the nation’s total volume of undiscovered, technically recoverable oil at about 134 billion barrels, compared with proven reserves of 21.3 billion barrels. Oil discoveries during 2009 got off to a strong start, prompting The New York Times to report that people in the industry say there is plenty of oil in the ground, especially beneath the ocean floor, even if finding and extracting it is becoming harder. The fact that there has never been an oil spill from an offshore platform is proof enough to most Americans that we should drill in the relatively shallow waters of the continental shelf, but understandably, for those who live on the coasts where the drilling would occur, that proof of past performance may not be a good enough guarantee of future results. Yet polls of Floridians, for example, show that when gasoline prices climb very high—or when they are assured that federal revenues derived from drilling would be directed to the states where the drilling occurs—the majority supports offshore drilling. Alaskans and Rocky Mountain residents overwhelmingly support increased oil drilling in their regions. Opposition to drilling comes not from neighbors to the potential platforms, but from environmental activists in other states who oppose it on general grounds, regardless of how sensitively the oil extraction can be carried out.