Public’s Contradictory Goals Create False Energy Villains

Some political scientists argue that Americans are increasingly aware of the costs of legislation aimed at special interests or causes. This theory, however, does not hold for energy issues.

Over the years, a safe bet for some inhabitants of Capitol Hill has been legislation designed to benefit particular constituencies at the expense of the major energy companies. Big oil companies and utilities are generally villains in the mind of the public. A vote against them has never cost politicians much.

There is no question that the Alaskan oil spill this past winter further damaged the image of America’s big energy companies. Already the House has approved a bill that would add important new restrictions on offshore drilling. The electricity brownouts we may see in the Northeast this summer, sharp increases in the price of natural gas expected next winter and growing environmental problems will make matters worse. The public will likely view these developments as more examples of corporate greed and callousness. Pressure on politicians to shield consumers from price increases and the cost of environmental protection will mount.

Some politicians will respond. But farsighted ones will recognize that the energy companies are not the problem. The source of our trouble is, instead, in the public’s contradictory desires in the energy area. The task facing these leaders is to educate constituents about the trade-offs in energy. Every day they wait, they paint the country more tightly into a corner.

The unhappiness with energy companies results from their being unable to provide what Americans want--low prices, minimal environmental impact and guaranteed domestic supplies. They cannot achieve these objectives concurrently because the goals are contradictory. Americans say they want oil companies to reduce pollution associated with producing oil. But they also want low prices. Unfortunately, reducing environmental risks by shutting off promising geologic areas or investing in pollution-control equipment will increase costs and prices. Energy conservation could make drilling in some areas unnecessary. But the best way to induce conservation is to raise prices, not lower them.

An alternative is to look abroad for oil. But the public says that it is suspicious of American-owned firms operating overseas and wants them instead to look for oil in the United States. Similarly, Americans want low-cost, ample supplies of electricity but also want to put a stop to acid rain and global warming and avoid the risks associated with nuclear power. Unfortunately, the potential costs of responding to acid rain and global warming are in the billions of dollars; for example, the acid rain provisions alone of the President’s new clean air package would cost $4 billion a year.

Shutting down nuclear plants is also costly. The dilemma is represented by recent decisions to close nuclear plants in Sacramento and in New York state. The public has vetoed a potential power source, at least partly because of the perceived environmental consequences. But it shows no signs of willingness to pay the long-term higher prices of meeting rising demand by generating power from non-nuclear sources.

The best way to make the public recognize its contradictory desires concerning energy is to address these trade-offs through market-based mechanisms--such as taxes on gasoline use or coal consumption--to reflect the environmental costs of producing and consuming energy. But the public has hardly jumped to accept this in the past--possibly, in part, because of their ideas about the profitability of energy companies. In the public mind, we already pay too much for energy. They believe we can pay for the environmental cleanups by reducing the outlandish profits of the energy companies.

Responsible policy-makers have little choice but to try to enlighten public opinion about the real profitability of energy companies and the trade-offs necessary for sound energy policy. In the meantime, they will need to summon up the courage to make what may be unpopular choices on key energy issues.

A good example of the type of leadership we need comes from Energy Secretary James Watkins and his opposition to the closing of the Seabrook and Shoreham nuclear plants. With the Northeast facing shortages of electricity, a failure to start up those plants is counterproductive. In the same way, the worst possible outcome of the Alaskan oil spill would be measures that restrict domestic exploration without recognizing the inevitable impact on prices and import levels.

The trade-offs are present whether we like it or not. Washington must find a way to make people recognize them.