One of the few commendable parts of the Stimulus Bill was the money devoted to seeking alternative energy sources. I don’t believe it will lead to “millions of new jobs” - that’s pure politics and doesn’t take into account the millions of “old” jobs that will be lost. Experts are divided whether there will be a net gain in employment - and we won’t see any evidence of that for a couple of decades.
But the president’s emphasis on developing these technologies is spot on. And, I think to a very large degree, his approach is a sound one.
Everyone agrees we must wean ourselves from dependence on foreign oil, and eventually we must radically alter the economy in order to deal with declining oil supplies.
It isn’t really a question of drilling. The fact is, the world is partially a victim of America’s success in in applying our soft power in ways that have caused an explosion of economic activity in the third world that has resulted in massive increases in demand for oil the world over. China and India - two huge nations - are seeing big increases in their energy needs every year. Coal is only a stopgap measure for both - not only for its problems with carbon emissions but the suffocating air pollution that goes with it.
Globalization, coupled with our developmental aid over the last couple of decades, has caused a revolution in living standards. OPEC nations are at near capacity in supplying clients with oil and the price remains high. This should tell you that the demand curve is outstripping supply. And the gap is getting wider.
(The question of whether we are already at “Peak Oil” production is separate to the question of current supply. There are encouraging signs of some new finds in South America and the Caribbean, but those fields will only delay the inevitable crunch by a few years at most.)
So the quest for renewables is both necessary and immediate. And the president has come up with a plan via the stim bill that will ratchet up research and development while allowing the market to pick winners and losers.
It’s really the kind of public-private partnership that we need to see the kinds of innovative technologies that will revolutionize the way we live and change the economy in ways we can barely fathom now.
Why not let the market handle the whole thing? Ordinarily, that would be the optimum solution. But we’re talking about dollar amounts for basic research that are far beyond the capacity of any company to pay for - or generate the speed necessary to make this transition before supplies really start to pinch.
The days when a Thomas Edison could fund his own lab and turn out miraculous invention and invention are gone. While we shouldn’t entirely dismiss the work of American tinkerers, the fact is, in order to overcome the technological and engineering problems associated with making us independent of foreign oil, develop “clean coal” applications, take us to the next level in solar, wind, and car battery power, and fix our electric power grid, it will take the massive infusions of cash into research that Obama is proposing.
Oversight, as this New York Times editorial mentioned at the time of the stim bill passage, will be vitally important:
Eighty-billion dollars is still a lot of money. And the federal agencies overseeing its disbursement must provide strong regulation and firm guidance to ensure that it is spent wisely. Money invested in a modern electricity grid, for instance, will have been badly spent if it is used merely to build transmission towers to move energy from old coal-fired power plants. It will be well spent if it helps move clean energy, such as wind and solar power, from, say, Texas, to distant cities that need it.
That is just one of many provisions that will bear close watching as the money flows to states, cities and businesses.
Yes, there is some waste in the bill - including monies earmarked for AMTRAK and a dubious high speed rail project. But there is also a long overdue $11 billion in grants and $6 billion in loans to develop a “smart grid” for our electrical needs. Europeans are far ahead of us in this area and once completed, the new grid will not only make our energy use more efficient, but also provide better service to electricity consumers while keeping cost increases down.
I am also a little dubious about the $25 billion the government is spending to “weatherize” homes and retrofit government buildings to be more energy conscious. Given past history, bureaucrats always seem to find ways to redefine what “retrofit” means. Look for a lot of bells and whistles added to government buildings without much in energy savings.
That said, we should be excited about a tenfold increase in monies given for research into better car batteries (they are improving almost every year), and a tenfold increase in developing “clean coal” technologies. Of the latter, I am less excited simply because the entire coal industry is going to be decimated if cap and trade goes through in the senate. Developing a costly solution for an industry that is being shoved to the sidelines may not be the most efficient use of that money.
But the $20 billion in tax incentives to develop alternative fuels and energy sources is the key. Note that the incentives will not favor one company over another and could set off a gold rush toward energy innovation that would almost certainly hasten improvements in these technologies. For instance, we will probably discover just how viable energy produced by wind power can be when used on an industrial scale. It won’t work everywhere - just as solar power will have its limits. But the trick is to come up with the right combination that will dramatically reduce our dependence on oil.
Obviously, no plan is without its drawbacks. It will take decades to see the kind of progress that will really make a difference. Alternative energy sources currently supply less than 3% of our needs. It will take a sustained effort over many years to bring these technologies online, and the national will to make changes in how we think of energy and how we use it. No easy task, that, as President Obama said at MIT yesterday:
Now, while the challenges today are different, we have to draw on the same spirit of innovation that’s always been central to our success. And that’s especially true when it comes to energy. There may be plenty of room for debate as to how we transition from fossil fuels to renewable fuels — we all understand there’s no silver bullet to do it. There’s going to be a lot of debate about how we move from an economy that’s importing oil to one that’s exporting clean energy technology; how we harness the innovative potential on display here at MIT to create millions of new jobs; and how we will lead the world to prevent the worst consequences of climate change. There are going to be all sorts of debates, both in the laboratory and on Capitol Hill. But there’s no question that we must do all these things.
Countries on every corner of this Earth now recognize that energy supplies are growing scarcer, energy demands are growing larger, and rising energy use imperils the planet we will leave to future generations. And that’s why the world is now engaged in a peaceful competition to determine the technologies that will power the 21st century. From China to India, from Japan to Germany, nations everywhere are racing to develop new ways to producing and use energy. The nation that wins this competition will be the nation that leads the global economy. I am convinced of that. And I want America to be that nation. It’s that simple.
I would quibble with the president and add that the bio-tech revolution - one we are currently leading but in danger of falling back - will also determine which nation “leads the global economy.” But he is correct to make the search for viable renewables into a race.
And given this excellent head start, I wouldn’t bet against America just yet.
Nick Loris at the Heritage blog also finds some good things in the president’s speech at MIT. But he also points out what I did - that the idea these programs will result in a net gain of jobs is dubious at best.
But the green stimulus, free lunch rhetoric neglects the costs, both real and opportunity costs, that come with a government stimulus. Heritage analyst Ben Lieberman writes that a green stimulus is actually a contradiction in terms: “Support for renewables would likely cost more jobs than are created. For example, subsidies for wind and solar energy would, at least from the narrow perspective of the wind and solar industries, create new jobs as more of these systems are manufactured and installed. But the tax dollars needed to help pay for them cost jobs elsewhere, as would the pricey electricity they produce.”
Our analysis of the Waxman-Markey cap and trade bill finds that there will be 1.9 million fewer jobs by 2012 after accounting for green jobs. Job losses would grow to 2.5 million by 2035. This makes us a cap and trade naysayer, who Obama attacks towards the end of his speech.
I really wish the president would simply stick to promoting these programs as a spur to innovation rather than some kind of jobs program. He is on much firmer ground, as Loris points out, when talking about the spirit of entrepreneurship that these monies will ignite.