There are so many depressing studies on energy policy that I thought it was worth highlighting an optimistic one. The Rand Corp. just produced an analysis which predicts that alternative energy sources (like wind, solar and ethanol) could furnish as much as 25% of the U.S.'s conventional energy by 2025 at little or no additional expense. From the WSJ:
The Rand study concludes that because prices for gasoline, natural gas and coal are likely to remain high, their cost advantage over renewables will erode, furthered by the hope that ethanol from farm wastes will be available by 2020.Renewable fuels now produce only 6% of the nation's energy, and about half of that comes from hydroelectric dams. The study assumes renewable-energy costs will keep dropping at the rate of recent years. It says raising the use of renewables to 25% of all U.S. energy consumed would reduce U.S. reliance on oil by about 20% or the equivalent of the imports from Saudi Arabia and Venezuela. The study says the expected growth of energy-related emissions of carbon dioxide, thought to be artificially warming the atmosphere, would be cut by two-thirds over the next 19 years.
Rand researchers modeled more than 1,500 economic scenarios and found that in most cases, increasing the use of renewable fuels -- which don't enlarge the atmosphere's carbon-dioxide buildup -- would be cheaper than federal regulations forcing the reduction of carbon-dioxide emissions, about a third of which come from vehicles.
It seems to me that the optimal policy consists of both increased regulations (which increase the cost of fossil fuels) and investments which increase the use of alternative energy. The best way to get people to eat a carrot is to threaten them with a stick.
Comments (4)
Or we could assign a committee to study it for the next decade while the oil companies continue to rake in record profits. Any idea which alternative the Bush administration will take?
Posted by: Mustafa Mond, FCD | November 13, 2006 12:07 PM