The End of Energy Policy

We may as well say it out loud: Not only is fiscal and monetary policy running into limits in the advanced industrial (or OECD) countries, so that growth and jobs increasingly seem a question of luck; energy policy also is running into a brick wall. Everywhere in the rich countries of Europe, North America, and Asia, budgetary shortfalls, a reluctance to do anything that would further jeopardize growth, and the fallout from the Fukushima nuclear catastrophe have trumped energy and climate objectives.

OPEC, contrary to some expectations, now accounts for almost as large a fraction of world oil reserves as it did in 1973. Though it had little success in 2008–09 in slowing a precipitous drop in oil prices, this hardly matters in the larger scheme of things. With demand sure to keep growing sharply from the fastest-growing developing countries, and with the age of easy oil over, the basic trend will be for prices to remain high. For OPEC's biggest customers, "energy independence" is as distant a goal as it was a generation ago.

Though Europe has managed to cut its total oil consumption for several years in a row, its North Sea reserves are running low and its dependence on imports from Russia as well as the Middle East is growing. What is more, as Germany and Italy have adopted plans to limit or end reliance on nuclear energy, natural gas imports from Russia are sure to rise too—imports that are even more vulnerable than oil to interruption and manipulation.

Less reliance on atomic power also means much more generation of electricity from coal, in both Germany and Japan, and with that, higher-than-hoped-for greenhouse gas emissions. Since the adoption of the Kyoto Protocol in 1997, Germany and the United Kingdom have been the most aggressive and successful of the world's major world economies in reducing their greenhouse gas emissions. But that leadership now is threatened not only by greater dependence on fossil fuels but also by limits to how far and fast they can go with wind, the only real alternative to coal, gas, and nuclear for utility-scale power generation.

Germany, to be sure, has strengthened government incentives for offshore wind, and it remains optimistic about wind's growth potential. But let's not forget that favorable onshore sites have been largely exhausted, that the country's electricity prices already are rising quite sharply post-Fukushima, and that more expensive offshore wind could run into a consumer backlash.

We're already seeing that in the UK. Several years ago I paid a visit to the offices of Britain's Friends of the Earth in London, having previously visited in 1978. I learned that FoE's grassroots organizers were now trying to persuade activists to promote (and not oppose) plans for new wind farms; thirty years before organizers were helping activists block proposed nuclear power plants. Because of wide opposition to onshore wind in the UK, the government has had to resort to an ambitious program of offshore generation.

According to one critic of the program, the costs of British offshore wind could come to almost US $10 000 per citizen and be, on an installed megawatt basis, 10 to 12 times the cost of new natural gas generation.

Because of rising costs and economic worries, we have not been hearing the leaders of Germany, Japan, and the UK complain about the weakness of the U.S. greenhouse gas reduction program. It is basically an obsolete "no regrets" approach, of the kind widely recommended in the 1990s, when the scientific consensus was that climate change might turn out to be a serious problem: Promote green energy technology and domestic energy technology—things that make sense to do anyway, and which also would have a benign impact on greenhouse gas emissions.

Today the scientific consensus is that climate change definitely is a serious problem, but the United States, China, and India remain unwilling to address it frontally, and few nations are eager to call them to account.

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