Professor Michael J. Graetz Delivers Speech on Past, Future of U.S. Energy Policy

Discusses Themes in New Essay Published by the American Academy of Arts and Sciences’ Quarterly Journal

New York, April 30, 2012—Professor Michael J. Graetz delivered a speech last week at the National Press Club in Washington, D.C., portraying as ineffectual and often schizophrenic the energy policies undertaken by the U.S. government over the past three decades.

Graetz, the Columbia Alumni Professor of Tax Law and the Wilbur H. Friedman Professor of Tax Law, was among several influential thinkers in energy matters to speak at the briefing, which was held in conjunction with the release of Spring 2012 issue of Dædalus, the quarterly journal of the American Academy of Arts and Sciences. The issue, titled “The Alternative Energy Future,” features a piercing essay by Graetz arguing that misguided initiatives, false hopes, and political pandering have paralyzed the development of viable alternative energy arrangements in the United States since the 1970s.

In his essay, titled “Energy Policy: Past or Prologue,” Graetz examines the pernicious consequences of an American political reality in which cheap energy is viewed as a basic right. “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 costs of the energy they consume,” he writes.

Surveying the political landscape from the Nixon administration to the current White House occupant, Graetz sifts through the range of legislative efforts and elusive “silver-bullet” technological solutions championed by U.S. presidents and policymakers. Nixon viewed nuclear “breeder reactors” as the answer, while Jimmy Carter placed his faith in so-called “synfuels” produced from coal. Congressional earmarks have led to a debilitating misallocation of financial resources for research and development of new technologies, while legislators have chosen “to subsidize energy the production and consumption of fuels we want to encourage rather than to tax the use of fuels we want to discourage,” Graetz notes.

“The contrast with tobacco, for example, in which taxes have been used over time both to reduce its consumption and to help finance some of the costs it imposes on public budgets and society, could hardly be more stark,” he writes.

The revenue from taxes imposed on the carbon content of fossil fuels, Graetz notes in the essay, could be returned to the American people directly by reducing taxes on wages.

This Spring 2012 issue of Dædalus was co-edited by Stephen Ansolabehere, a Harvard University professor of government, and Robert Fri, who served as a deputy administrator at the Environmental Protection Agency during the Nixon administration and as a top Energy Research and Development Agency official under President Gerald Ford.

Given the reluctance of policymakers to tax energy use, one effective option at legislators’ disposal is the type of “cap-and-trade” regulatory regime implemented under the Clean Air Act of 1990, which successfully tackled the acid rain blight stemming from coal-fired electrical utilities, Graetz writes in his essay. A cap-and-trade fuel efficiency regime could motivate carmakers to boost the mileage of their vehicles and thus reduce gasoline consumption much more effectively than the Corporate Average Fuel Economy (CAFE) standards enacted in the 1970s, he says. But cap and trade, which is widely misunderstood by the public, has become anathema to Republican lawmakers in the current polarized political environment, Graetz notes.

“Thus, our dysfunctional politics keeps us mired in an inefficient regulatory structure enacted more than thirty-five years ago, while unnecessary costs to our fragile economy multiply,” Graetz writes.

Eight consecutive presidents, Graetz notes, have promised to end U.S. dependence on Mideast oil. This vow, he recalls, was exploited for comic effect in 2010—during the BP oil spill in the Gulf of Mexico—by Jon Stewart of The Daily Show, which played clips of each of these presidents, from Nixon to Obama, making his very promise.

“The problem, of course, is that forty years of energy policy failures is not funny,” Graetz writes. “But our history offers little cause for optimism. Knowing our past failures may not be enough to prevent us from repeating them.”

A video of Graetz’s speech is available here.