Paying the True Price of Energy

Michael Glaentz, professor of law at Columbia, has a new book on the last four decades of America's energy policy, The End of Energy — The Unmaking of America’s Environment, Security and Independence. Here (from Yale Environment 360) he summarizes the various failures of governmental policy:

In his March speech, President Obama seemed ready to deploy all of the levers of government to cure us, at last, of what all eight presidents, including him, have called our “addiction to oil.” He promised to open federally controlled property to more oil drilling and to expand production of domestic natural gas. He said he would use the federal government’s spending power to purchase only hybrid, electric, and alternative fuel cars and trucks and to substitute biofuels for petroleum in military jets. The president also promised government “incentives” for a litany of oil-saving items and activities, including automobile batteries, electric fueling stations, high-speed rail and mass transit, energy-efficient building materials, and biofuels. And he promised to tighten regulatory requirements governing automobile fuel efficiency, to extend such regulations to large trucks, and to adopt new federal requirements for the ways in which the nation’s electricity will be produced. Along the way — notwithstanding the troubles in Japan — he again embraced nuclear power, and he even gave a thumbs-up to that chimera, “clean coal.” The president would regulate, bribe, purchase, and cajole to transform how we produce and use energy in this country.

In his kennel of proposals, however, one dog failed to bark, the same dog that never barks. In the thousands of pages of energy legislation and regulations enacted since energy policy came to the fore in the 1970s, Congress has never demanded that Americans pay a price that reflects the true price of the energy they consume. For nearly a decade following the oil embargo of 1973, Congress refused even to allow the price of gas at the pump to reflect the worldwide market price of oil. No one now contemplates requiring gasoline prices to include, for example, the costs of  keeping oil moving safely from the Persian Gulf into our gas tanks, or insisting that our electricity prices reflect the costs of coal pollution or of nuclear power safety.

The problem, of course, is that reflecting these kinds of costs in the price of energy would require taxing energy consumption, rather than subsidizing its production. As our massive government debt reminds us, it is far easier for our government to spend than to tax. Past efforts to tax energy consumption are not encouraging. Recall the failed efforts of Jimmy Carter to tax gasoline or Bill Clinton’s BTU energy tax defeat. So no one should be surprised that President Obama did not suggest that we should tax what we want to reduce — petroleum use and electricity consumption from fossil fuels — and use the revenues to reduce taxes on things we want to increase, such as jobs and wages.