The case for energy taxes is even stronger now

Published in The News Tribune, March 30, 2011

Like many others, until recently I was a reluctant fan of nuclear energy.   I’d become convinced that it was a safe way of producing electricity.  The fact that one ton of uranium can be used to replace the burning of 16,000 tons of coal or 80,000 barrels of oil is still a strong selling point.    Yet that a nuclear disaster of the magnitude Japan is now facing could happen — in Japan of all places –is surely putting nuclear power’s future on ice.

This reduces the options for meeting our energy needs down to essentially three choices, one of which would be the far better one.

First is a continued reliance on fossil fuels such as coal and oil.  This would be the cheapest option in terms of the cost of running our cars and lighting our homes.     But burning coal is a dirty business; in the U.S. alone, tens of thousands of deaths each year can be traced to the emissions of coal-burning plants.   Couple that with the high environmental and national security cost of our reliance on oil, and you can’t really say that fossil fuels is “cheap”.  Finally, add in the potential longer term costs of climate change, and our continued reliance on fossil fuels becomes the least attractive of our future energy options.

Options two and three involve switching to renewable energy sources, and are better options.  However, to do this effectively, the devil is in the detail. 

Option two is politically the most attractive one, and is generally what we in the U.S. have preferred:  mandate energy efficiency standards and direct public resources to certain forms of clean energy such as wind or ethanol.   Such policies are politically attractive because they seem sensible:  If cars should get better gas mileage or homes should be better insulated, why not just require that they are built that way?   Such policies are also attractive because while costly, citizens aren’t aware of just how costly they are.   Who among us can say how much is taken out of your wallet each year because of federal ethanol subsidies?  Given a choice, politicians will always opt for costs that are conveniently hidden from view.

But policies attempting to manage and direct a transition away from fossil fuels have repeatedly been found wanting.    Take the example of fuel efficiency standards for our cars.  A study by the Congressional Budget Office found that these standards cost citizens over $.50 for each gallon of gas that it winds up conserving, a price over twice what it would cost to get the same conservation via a gas tax.  And in addition to being costly, such policies can backfire.  At the same time that our cars have become more energy efficient, we have become more reliant on them, driving them more than ever.    In the last 15 years, U.S. gasoline consumption has increased by more than 25 percent.  Similarly, as lighting has become more energy efficient, we’ve found more and more ways to use lights.  We now consume more electricity per-person in the U.S. than ever before.

As hinted at above, a more effective way of weaning ourselves from fossil fuels is to make them more expensive.  Something along the lines of a carbon tax that increases the price of fossil fuels based on how much they emit would be an example.  If things made with fossil fuels were to become more expensive, two things happen.  First, we’d conserve electricity and gasoline and use less of anything made with them.  Second, by making fossil fuels more expensive, we make alternatives more attractive.  Citizens are much more interested in supporting mass transit when driving their car is more costly; and entrepreneurs are more likely to invest in new energy technologies when the older ones become less profitable.   Europe and Japan’s greater reliance on energy taxes helps explain why we consume half again as much energy as they do. 

If nothing else, the nuclear catastrophe brewing in Japan should tell us that it is once again time to revisit our nation’s energy policy.   The options are pretty clear, as are the consequences of these options.