As we saw in the 1970s, new energy technologies blossom when oil
gets expensive. We can raise the price of fossil fuels again without
hurting consumers - if we implement a fee and rebate system.
The energy crisis from 1973 to 1981 was not a happy period for
Americans, but it was also a time when entrepreneurs and engineers
formed a huge number of new businesses aimed at producing low-cost
solar cells, high-efficiency engines for automobiles, better
insulation for our houses, and so on.
I worked in the energy field then, consulting for many of these
small - and large - companies. One was Sanders Associates of Nashua,
N.H., with which I worked on a 100-megawatt solar turbine plant that
came close to becoming reality. It was an exciting time for
thousands of businesses that were close to major solutions to
different aspects of the energy shortage and the extraordinarily
high price of oil.
And then around 1981 the price of oil collapsed. Most of the
companies working on solutions to the energy problems were either
closed down or severely cut back.
Must move away from fossil fuels
Today, for environmental and national security reasons, America
urgently needs innovative energy solutions that can power an economy
still largely driven by fossil fuels. But so long as the price of
oil remains superficially cheap, the incentive to develop the next
generation of energy technologies will remain weak.
The lesson, then, is simple: If we could find a relatively
painless way of increasing the price of fossil-fuel energy and the
emission of pollutants, we could produce a similar surge of new
businesses and reduce the unemployment rate - if there were a
reasonable guarantee that the increased prices were permanent.
Oil prices deserve to be higher: Economists are continually
telling us that fossil fuels and polluting emissions are severely
underpriced because their price does not include all the "external
costs" such as health, ecological, and environmental effects.
Thousands of Americans who live in Ohio, Pennsylvania, West
Virginia, and other states where companies have discovered new
natural-gas deposits buried deep within shale formations are
encountering these "externalities" in the form of polluted water
and, in some cases, the ability to light the water in their kitchen
sinks on fire!
Cap-and-trade is the wrong way to go
Many economists propose energy and emission taxes such as cap-
and-trade as a way to price energy more accurately so that we would
consume less and have fewer cases of pollution and related health
Such taxes however, have three severe disadvantages. They are
regressive, hurting the poor more than the rich. They cause
inflation. And they give huge amounts of money to Washington to
spend on boondoggles like bridges to nowhere. …