Professor Michael Graetz Looks at How U.S. Squandered Chances to Plan for Energy Independence

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Professor Michael Graetz Looks at How U.S. Squandered Chances to Plan for Energy Independence

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New York, March 21, 2011--As Michael Graetz sees it, cheap energy ultimately comes at a steep price.

“Despite gasoline hovering near four dollars a gallon, we’re underpaying for energy,” said Graetz, the Isidore and Seville Sulzbacher Professor of Law at Columbia Law School. “You raise the price and you get much more energy conservation and open the space for other forms of energy to compete.”

The many missteps, poor assumptions, and parochial interests that Graetz said have helped characterize U.S. energy policy over the last 40 years are analyzed in his latest book The End of Energy, to be published next month by M.I.T. Press.

Even though they are anathema at the White House and on Capitol Hill, Graetz favors higher taxes on carbon emissions, petroleum products, and gasoline as the best way to encourage people to drive less, spur energy efficiency, and allow cleaner-burning fuels to flourish. At the same time, though, he would return those higher revenues to taxpayers either per capita or based on income.

“Congress has been so beholden to both the money and to regional parochial interests, that it has acted irrationally over 40 years,” said Graetz, one of the nation’s leading experts on tax policy. “We’ve had subsidies that make no sense; ethanol is probably the best example of that.”

Graetz argues that Washington has squandered many opportunities to put in place necessary changes to energy policies. In the book, he writes the first call to action should have come after the OPEC oil embargo in 1973, which was the Arab response to U.S. support of Israel during the Yom Kippur war. Yet, the status quo prevailed, and in many ways still does.

“That was the wake-up call to free ourselves from the bondage of OPEC. Instead, we hit the snooze button,” Graetz said. “The U.S. brings in 5 million barrels of OPEC oil every day. The recent turmoil in the Middle East has shown us why that’s too much to rely on.”

According to Graetz, the embargo was also a way for the government to acknowledge the U.S. was using too much oil—until the 1970s, all the oil the U.S. needed was produced domestically—and that the nation had to look to other forms of energy. But presidents and Congress have been loathe, Graetz said, to take decisive measures to raise the money needed to effect meaningful change. The federal gasoline tax of 18.4 cents a gallon was last increased in 1993.

“The price of oil quadrupled from the beginning of the 70s to the end of the decade. Jimmy Carter had made energy policy the centerpiece of his administration in the early days,” Graetz said. “Yet, here we are.”

Graetz does not confine blame to special interests and politicians. He said the environmental movement should also be faulted for taking a hardline approach to alternative energy sources.

“When you propose to build wind turbines off the coast of Connecticut, they’re absolutely opposed to having Long Island Sound filled with wind turbines,” Graetz said. “They wanted to get solar panels on every lamp post and rooftop. But that idea that you would have large solar panels to feed a utility to produce electricity was out of the question because that would spoil the countryside.”

In his latest State of the Union address, President Obama called for 80 percent of the nation’s electricity to come from low-carbon sources by 2035, although he has not yet put forth any legislation to fulfill that vision. And that goal comes amid the demise of climate legislation in Congress last year, and recent attempts by Republicans in the House to strip the Environmental Protection Agency of the power to regulate greenhouse gases.

For Graetz, all that is a variation on an overly familiar theme. To avoid the risks of a “genuine catastrophe,” he said steps need to be taken now toward a meaningful and lasting energy policy.

“There’s no panacea. It’s a complicated problem going forward with complicated solutions,” Graetz said. “But they need to be solutions grounded in sound policy and not solutions that are grounded in who gave you the most campaign contributions.”

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