Toward an Energy Policy: Recent Studies Offer Guidance in Assessing the Administration's Forthcoming Proposals

More than a year has passed since the Arab oil embargo threw a complacent America into temporary panic and made it clear that Americans have irrevocably added energy to food, clothing and shelter as one of life's essentials. While the panic is gone, at least for now, the crisis is likely to be with us for a long time in one form or another. Our appetite for energy, already six times the world per capita average,¹ continues to grow faster than our capacity to develop new sources of supply.

Remarkable agreement exists among analysts as to the dimensions of the crisis. Its essence is that while the United States relies on oil and gas for 77 percent of its energy needs (46 percent oil, 31 percent natural gas) only about ten years of proven domestic oil and gas reserves remain at current prices. Domestic crude oil production peaked in 1970 and has been steadily declining ever since.² United States' coal reserves will last more than 800 years at current rates of consumption, but coal presently constitutes only 18 percent of our usage, and efforts to increase that percentage carry high costs in terms of environmental damage and social disruption. It was our increasing reliance on imported sources of crude oil (35 percent of our crude oil needs in 1973) that put drivers into gas lines this time last year, and while they waited in those lines the per barrel price of imported crude oil rose from $3 to $11. Clearly, current usage patterns cannot continue much longer.

While agreement exists on the nature of the problem, almost none is apparent on what to do about it. Basic disagreements have surfaced on questions of value and emphasis, including how much and what form of government intervention is acceptable in our lives and in the marketplace, how important are clean air and water, and how many farms and farmers we can tolerate moving off the top of strippable coal reserves at a time of world food shortages. Disagreements also arise to some extent from different ways of dealing with uncertainties such as the future price of crude oil on the world market, what level of imports can be expected from secure sources, how much oil lies under the outer continental shelf, and how quickly some of the newer sources can economically be put into production.

Analysts have identified certain possible trade-offs, some of which are extremely troublesome, including the possibilities of achieving greater fuel economy in motor vehicles by reducing or eliminating emission and safety equipment. Other trade-offs, however, are intriguing and offer promising flexibility. For example, the more the United States cuts down the growth rate of its demand for energy, the greater the opportunities to develop the cleaner, more renewable energy sources that are available. If the historical growth pattern of energy demand continues at its current 4.5 percent rate of annual increase, then all available manpower and investment resources must be bent toward large scale development of existing sources, including power from coal and nuclear energy. A slower growth rate will free some of these resources and allow time to develop the required technologies. It will also permit the application of smaller scale devices which use renewable or non-depletable sources, including solar collectors and windmills.

Another interesting trade-off is the impact of the world price of crude oil. A lower price, which is desirable as a means of limiting dollar outflows, inflation, and disproportionate impacts on lower income groups, renders the development of many potential energy sources economically [5 ELR 10004] infeasible. The current higher price of $11 per barrel, if it holds, will make energy produced from oil shale reserves, synthetics derived from coal, and geothermal resources, all of which the United States has in great abundance, competitive in the United States' marketplace. The higher price will also spur investments needed to develop further the techologies for making production of energy from these sources more economical.

A number of recent studies have analyzed these trade-offs in depth. Three in particular, A Time to Choose from the Ford Foundation's Energy Policy Project, FEA's Project Independence Report, and Wilson Clark's Energy for Survival,³ make notable contributions, summarized in this Comment.⁴ While the three adopt widely divergent recommendations for specific policies, they are of one voice in urging that the worst possible course for the United State is the present drift.

The Report of the Energy Policy Project

The Energy Policy Project, beneficiary of a $4 million two-year grant from the Ford Foundation, has produced a clear set of recommendations which, because of the urgency with which they are stated, will be difficult for energy policy makers in the Administration and in Congress to ignore. The fact that a number of the recommendations contained in A Time to Choose can be found in statements made by project director David Freeman several years ago⁵ makes them no less relevant and urgent now then they were then. If anything, they have become more urgent. The major recommendation of the report is that the United States adopt and enforce "a consistent, integrated energy conservation policy" to reduce the growth rate of energy consumption between now and 1985 from 4.5 percent to 2 percent per year or less. According to the study, this would buy time to develop cleaner, renewable energy sources, including solar and geothermal energy, use of organic wastes, "and maybe in time nuclear fission;" it would also enable less environmentally destructive development of risky sources, such as oil shale and outer continental shelf oil reserves.

The report selects this course of action from a set of three "scenarios" it describes in depth: the historical growth scenario, the "technical fix" scenario (2 percent growth)⁶ and a Zero Energy Growth scenario. The authors of the report are optimistic that the middle course they have chosen will make it possible for Americans to keep lifestyles that consume high levels of energy without taxing energy resources beyond their limits or causing major environmental harm. The reduced growth rate will provide enough energy for "full employment and steady growth in GNP and personal incomes." It also includes energy enough "to heat and air-condition every home in the country, and to provide for water heating, a cooking stove, a freezer, a dishwasher, a color television, and a big frost-free refrigerator in every household in the U.S."

The report thus puts to rest the assertion so assiduously promoted by Mobil and other corporations with a stake in continued high rates of energy growth that the only way to insure a comfortable standard of living and good health is to pursue a policy of all-out development of energy resources. However, the report does not ask for any real changes in the high-energy way of life that has brought on the crisis we now face. Instead, it recommends that the major burdens be placed on government and industry to adopt policies that will bring about a lower growth rate (perhaps because policies and industrial practices are more easily changed than the habits of 200 million separate individuals). A broad role for government is properly justified solely by the fact that more than half of the remaining fossil fuel reserves in the United States (primarily coal) are located on publicly owned land. The assignment of major responsibilities to industry also has a firm basis in the finding that some United States industries use energy at levels of 1 percent efficiency, and many others are only slightly less wasteful.⁷

The report offers a number of specific recommendations for achieving a cut of more than half in the current growth rate of energy demand: (1) reaching an average automobile fuel economy of 20 miles per gallon by 1985, by means of mandatory federal standards on vehicle makers; (2) more efficient space heating and cooling (which now consumes 17 percent of our energy supplies), accomplished in part through government programs making credit more easily available for energy-saving investments in existing structures, and in part through strict federal standards for insulation in new structures; (3) a shift in research funding toward energy conservation technology, including thriftier cars, tighter buildings, and [5 ELR 10005] recycling; and (4) setting fuel prices to reflect the full costs of producing energy, including elimination of energy industry subsidies and abolishing promotional discounts for large users of electricity.

The report also urges no relaxation in current pollution standards, and describes as a serious but little-known hazard the presence in the air of very small (sub-micron) particles of sulfate and other pollutants from fossil fuel combustion that are not screened from the lung, and are not presently covered by air pollution standards.

Project Independence Report

The FEA's report on Project Independence, which was widely expected to provide a blueprint for Presidential decision-making on energy policy, turned out not to be a blueprint at all. Instead it is a weighing of alternative broad strategies. The initial focus of the project, to plan for eliminating United States' reliance on imported oil by 1980, as reported in an earlier ELR comment,⁸ was abandoned early on, and instead readers are offered a comprehensive treatment of the United States' energy problems.

Following the format of the Energy Policy Project, the FEA study offers a comparison of broad strategic options available to the United States, but gives the options different names. The study compares a base case, called "business as usual," to three others, increasing domestic supply, conserving and managing energy demand, and a program establishing standby emergency programs. The report states at the outset that the strategies "are only illustrative" and in reality, "a national energy policy will probably contain elements from each."

It is distressing that the report fails to isolate energy conservation as an available strategy, as does the Energy Policy Project Report. Instead, FEA combines energy conservation with management of energy demand, a choice explained by the initial charge to FEA, which was to find ways of reducing reliance on imported oil. Reducing overall demand for energy, given this goal, is not enough; the high demand for oil vis a vis other energy sources becomes a specific target. Thus the report considers massive substitution of coal for oil in electrical power generating, and large increases in nuclear plant generating capacity. The result, however, is that energy conservation measures are not considered in the report apart from the effects of disruption and pollution associated with any major increase in coal mining the burning.

The Report is explicit in describing the weight it attaches to environmental objectives: "Environmental protection must be placed in perspective with other national goals, such as economic development, social welfare, and energy security." Each of the broad alternatives considered by FEA is weighed in terms of these four types of impacts, plus a fifth, the impact on development of alternative energy sources. The report therefore does not need to minimize its descriptions of the various environmental hazards accompanying different strategies; as serious as they are, the administration need not concern itself seriously with them, since they come out fourth in priority on the list of five. Chapter 4 of the report, on environmental assessments, among the shortest in the volume, raises the specter of a number of exotic hazards, including the revelation that the much touted western coal contains traces of uranium that will fill the air when the coal is burned. But it fails to suggest that any of the threats to the environment or to human health are unacceptable.

The Report is based on a complicated hierarchy of interrelated computer models, but even the extensive use of computers did not make it easy for the Report to come to any conclusions on energy policy. Perhaps not because the task was too complex, but because too many value questions and political judgments are required, the report refuses to bite the bullet: "[T]his Report," states the preface, "does not recommend specific policy actions." One reviewer concluded that the report only served "to further enrich the chaos that has settled upon government energy planning."⁹ To the report's credit, however, it does include a pair of masterful summaries, one an introduction, the other an overview.

FEA computer analysts were not able to confirm the conclusion of the Energy Policy Project study that a reduction to 2 percent in the growth rate of energy use could be accomplished without significant reduction in the quality of individual lifestyles. While FEA did find that such a growth rate could sustain an acceptable level of economic growth, it also found that individual choice would necessarily be limited and lifestyles forced to change. Among the energy conservation programs it considered were 20 mile per gallon mandatory auto standards, a 15 cent per gallon gas tax, a tax credit incentive to retrofit homes with improved insulation, research and development for increased energy efficiency in industrial processes, and national thermal standards for new homes and offices.

The impact of the report on Administration thinking is yet to be felt; its association with now-departed FEA Administrator John C. Sawhill, who signed off on the preface, may not serve it well in this regard.

Energy for Survival

Free-lance energy analyst Wilson Clark reaches conclusions which are much more pessimistic than those of either the FEA or the Ford Foundation study, but sees one ray of bright light, and recommends a way out of the crisis. In his 600-page book, Energy for Survival, Clark sees no great need to debate the intricacies of a federal energy policy. The crisis is deeper than we realize, he concludes, and our basic choices are already so severely limited that [5 ELR 10006] little flexibility remains. In Clark's view the fossil fuel base which supports our "high-energy way of life" is close to exhaustion domestically, and foreign sourses will not continue for long to allow the United States to drain the reserves of the rest of the world to satisfy its extraordinary needs. Serious technological, environmental, or economic problems prevent the ready utilization of just about every other known source of energy. The result will be soaring energy prices, decreased productivity, and economic decline of a long-term nature.

Clark predicts the United States will have to adapt to energy sources that today are viewed as novel and unimportant, including solar energy (sun and wind), geothermal energy, and hydrogen-based power, because these sources are non-depletable, at least for the duration of the current geological age. Clark advises recognizing the inevitable now, and working consciously toward modes of energy use that are small scale. His vision is a society based on decentralized production of its energy needs: "The reconstruction of society based on decentralized living habits in closer harmony with the Earth will not appear as a utopian dream, but as a necessity for survival in many areas." This conclusion follows from a lengthy exposition of the history of man's energy use, the diminishing potential for energy from existing sources, and an exhaustive exploration of the various energy sources which are regarded as possible replacements for inexpensive fossil fuels.

So-called "replacement" fossil fuels, such as coal-based synthetic gas, oil shale, oil from coal and solid wastes, tar sands, etc., all in his view will yield too little net energy or be too high-priced to offer real promise, and the dangers of nuclear fission and fusion, if employed on a large scale, make them unacceptable alternatives. He also rules out broad reliance on geothermal energy, tidal and hydroelectric power, hydrogen, and large scale solar power plants, each for its own reasons.

Clark stakes his hopes on smaller scale applications of solar and wind power, which his book explores in great detail. He describes recent technological advances in both areas, and takes his readers on technological walking tours through a number of homes in the United States now using solar-based energy for heating and cooling. He does not minimize the unresolved technological problems (for example, the need for improved ways to store energy at times when the sun isn't shining and the wind not blowing), but calls for the United States to devote a "substantial fraction of its resources to research and development efforts to utilize low-energy technologies and develop solar power, wind power and other natural energy sources." Clark's prescription is rooted not in any opposition to modern technology per se, but instead to the scale of its current applications in energy production. Once technology begins to transcend the human scale, he believes it becomes increasingly incomprehensible and lends itself to bureaucratic manipulation. He appears to welcome events which will force people to develop energy-conscious attitudes, and to live in smaller communities, based on decentralized energy use.

Clark's analysis has some appeal, but totally lacks suggestions on how society is to undertake the massive structural and institutional changes that will be required in moving to reliance on decentralized energy sources. Questions on what will happen to cities, to government and corporate aggregations, to transportation patterns, all subject to drastic impacts under Clark's predicted course of events, are left unanswered. The Clark scenario is thus the least credible of those offered. Moreover, he seems to neglect an obvious alternative, that the United States will continue with "business as usual" even if it means paying the environmental costs of unbridled strip mining, poorly controlled offshore exploration and exploitation, supertankers, deepwater ports, and Faustian bargains entrusting our descendants with the care and protection of lathal radioactive wastes from nuclear power generation.¹⁰ He also implicitly doubts the ability of leaders and citizens to adjust to a middle course, such as the one proposed by the Energy Policy Project. His apparent conclusion is that, in any event, either of these alternatives, business as usual or a 2 percent limit on energy growth, will ultimately lead to the same disastrous end.

Despite this recent outpouring of studies, recommendations, reports and strident oil company advertising campaigns, the current administration has yet to announce a national energy policy. The shape of that policy — which the Administration promises shortly — will obviously be of critical importance to environmentalists, since it is clear that some of the broad alternatives available to the President and Congress are tremendously more frightening than others. The single most important element to assess will be the extent of the Administration's commitment to programs for conserving energy.

Since whatever policy emerges is likely to be highly controversial, and moreover require congressional action, opportunities for public participation and debate will not easily be closed off. It was partly recognition of the need for broad public input that led FEA's Project Independence to hold back on reaching final recommendations: "If we only proposed one course of action before allowing public debate on these choices, we would merely replay the endless debate without action which has characterized U.S. energy policy for the past several years."

Always lurking overhead is the question no elected official is eager to face: how much will be energy policy that is adopted require individual American's to cut into their high-energy lifestyles. The problem is centered on diminishing oil reserves, and motor vehicles are the most profligate users of our oil reserves.The argument that Americans should be prepared to sacrifice is most forcefully presented the EPA Deputy Administrator [5 ELR 10007] John Quarles in an Article appearing elsewhere in this issue of ELR.¹¹ But Quarles, together with the Energy Policy Project, FEA's Project Independence, and others, persuasively urge that a major portion of the burden must fall on industry. The question remains whether the President will have the courage to propose policies that will put a fair share of the conservation burden on industry by fostering more efficient manufacturing technologies and plant operation through either incentives or direct regulation.

The studies summarized in this Comment should aid environmentalists in challenging the election of alternatives that promise certain or needless harm to human health or to the environment such as needless relaxation of air quality standards and deadlines, or a rollback of the environmental impact assessment process. They can also provide all interested persons with the means to encourage the President and Congress to make the move from energy politics to a reasonable energy policy.

1. This is the estimate of the Energy Policy Project (A Time to Choose, p. 6). Others have reached higher estimates. See for instance, Project Independence Report, p. 17, where FEA sets the multiple at 8. (See infra, n. 3 for further bibliographic information on these reports.)

2. From a peak of 11.3 million barrels per day (MBD) in 1970, production has fallen to its current 8.6 MBD. (Project Independence Report, pp. 81 and 5, respectively).

3. A Time to Choose: America's Energy Future, Ford Foundation Energy Policy Project (1974).

Project Independence Report, Federal Energy Administration, (1974), available from the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402 ($8.35, including a summary, which is also sold separately from the same source for $2.00).

W. Clark, Energy for Survival: The Alternative to Extinction, (1974).

4. Others include CEQ's "Half and Half Plan," summarized in Peterson, "Nation's Chief Environmental Advisor Offers a Long-Range Plan for Energy," Smithsonian Magazine, (July, 1974), pp. 80-85, and an Article by John Quarles, Deputy Administrator, Environmental Protection Agency, printed in this issue of ELR (5 ELR 50001).

5. See, for example, the text of a lecture reprinted in "Issues Associated with the Use of Energy: Toward a National Energy Policy," A Series of Lectures Presented at the Oak Ridge National Laboratory, January-April, 1972. (E. Hirst & D. Steiner, Eds.)

6. The phrase "Technical Fix" is used in the Report to mean technical corrections that will save energy, such as producing motor vehicles that will achieve better fuel economy.

7. E. Gyftopoulos & T. Widmer, Potential Fuel Effectiveness in Industry, one of 20 book-length studies commissioned by the Energy Policy Project.

8. Comment, Some Questions for a Questionable Project Independence, 4 ELR 10111 (Aug. 1974).

9. D. Greenberg, "New Federal Energy 'Blueprint' Compounds the Confusion," Science and Government Report, Vol. IV, No. 20, Nov. 15, 1974.

10. See A. Kneese, "Are We Making A Faustian Bargain?" Resources for the Future Newsletter, (Sept. 1973). Also available as a reprint from theEnvironmental Law Institute.

11. 5 ELR 50001 (Jan. 1975).