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Thesis & Antithesis

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greekdefaultwatch@gmail.com Natural gas consultant by day, blogger on the Greek economy by night. Trained as an economist and political scientist. I believe in common sense and in data, and my aim is to offer insight written in language that is clear and convincing.

30 July 2005

US energy nationalism?

This week, the US Senate passed a comprehensive energy bill (after four years of negotiations), while America also announced the formation of an “Asia-Pacific Partnership for Clean Development and Climate,” a non-binding agreement with Australia, India, China, South Korea and Japan to reduce the emission of greenhouse gases.

The energy bill is priced at approximately $17.6bn (1), and includes plenty incentives and tax credits for companies to pursue alternative energy sources. The Committee Chairman, Pete V. Domenici, commented that “using bonds and production tax credits, we provide a total of $4.1 billion in incentives to encourage the production of renewable energies. This tax package, like the authorizing package, is a green bill. It encourages conservation, efficiency and the use of clean and renewable energies” (1).

Meanwhile, around the globe, America resuscitated its commitment to curb global warming by agreeing to a partnership that could complement, but will most likely substitute, the Kyoto Protocol as a means of reducing emissions (at least for the nations concerned). The cornerstone of the agreement is that countries will set their own targets for emissions reductions, without an enforcement mechanism, and that the reductions will be achieved through the transnational transfer of technology.

Although welcomed in some circles as an agreement that brings together countries that Kyoto does not reach (America, Australia, China and India), elsewhere there was skepticism; the Worldwide Fund for Nature (WWF) said that, “a deal on climate change that doesn't limit pollution is the same as a peace plan that allows guns to be fired” (2).

Taken together, these two events signal America’s increased obsession with energy security and independence. The House version of the energy bill declared that it “decreases America’s dangerous dependence on foreign oil by increasing domestic oil and gas exploration and development on non-park federal lands and by authorizing expansion of the Strategic Petroleum Reserve’s (SPR) capacity to 1 billion barrels” (3). The Asia-Pacific Partnership, for its part, shows America’s uneasiness with relinquishing control of its energy (whatever that means) to foreign sources.

To be sure, the prima facie case for this skepticism is sound; religious fundamentalism in the Middle East, coupled with two oil shocks in the 1970s, have naturally made Americans suspicious of the link between trouble in the Middle East and their own energy supplies. And the skepticism for Kyoto is warranted because it is as close to a bad treaty as one could ever find—a good first step, but a bad treaty.

But America’s obsession with developing an indigenous energy supply goes beyond that. It was Richard Nixon who first called on Americans to rely on their own energy sources: “Let us set as our national goal that by the end of this decade [1970s] we will have developed the potential to meet our own energy needs without depending on any foreign sources” (4). And America’s knee-jerked objection to Kyoto is linked to the fear of setting any kind of limit on America’s emissions lest they tamper with America’s growth potential (as well as the absence of India and China from the deal), rather than a cost-analysis or scientific disagreement with the substance of the Treaty.

The follies of energy independence are too obvious to catalog in detail (5). And it will take time to judge whether the Asia-Pacific deal will be smokescreen or a substantive effort to curb emissions. But America’s energy nationalism will not do it good—the internationalization of energy markets is a prime guarantor of world peace and stability: countries that rely on open seas and stable politics to gain access to their energy sources are also countries that are inclined to defend the status quo.

In America’s case, this has been shown in the Gulf; today, as China looks for energy far from its shores, it behooves America to have a global partner who has a strong interest in preserving peace (in China’s case, it could also herald gradual change in places that the West has been unable to reach). In other words, as America fears the impact of terrorism to its energy supplies, that fear is also a good reason why America will be involved in distant places and provide some of the global public goods that form the basis of its leadership. Losing that would be too high a price to pay for an elusive energy autarky.

References:
(1) US Senate Committee on Energy and Natural Resources, Press Release, 27 July 2005, (link); two articles offer interest analyses of the bill; Gregg Easterbrook, “Votes Yes for the Energy Bill, Then Start Working on the Real Issues,” (link), and Jerry Taylor and Peter Van Doren, “Energy Bill Illusions,” (link)
(2) “US Agrees Climate Deal with Asia,” BBC News, 28 July 2005, (link)
(3) “Energy Policy Act of 2005 Highlights,” House Committee on Energy and Commerce, (link)
(4) Pietro S. Nivola, “Energy Independence or Interdependence?” Brookings Review, Spring 2002, (link)
(5) For a good read, Jerry Taylor, “No Matter What, Oil will Flow,” Los Angeles Times, 12 October 2001 and Pietro Nivola, ref. 4

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