Freedom of Choice on Energy Policy

Third Quarter 2001

by Edward R. Huff and James W. Skillen

Answering a question about President Bush's energy policy in early May, Ari Fleischer, the president's White House spokesman, explained that the aim is to get America's bountiful resources "into the hands of consumers so they can make the choices that they want to make."

From the evidence we see, Americans would like to enjoy clean air and water while choosing inexpensive gasoline to fuel any size car they want to drive, and use all the electricity they want without any worry about escalating prices. However, these are not choices that President Bush and Congress can guarantee. Regardless of how much oil, gas and coal are pumped or mined, nothing Washington can do will guarantee an unlimited, cheap supply of energy to enable consumers to make whatever choices they prefer. There will always be constraints that force up prices or exclude choices. Consumers will always be constrained in one way or another—by production cut-backs in the Middle East, or by the distribution/production crisis in California, or by popular opposition to nuclear production, or by popular demand for roads rather than public transit.

In reality, therefore, Americans face two kinds of choices—choices to consume and choices about how to respond to constraints on consumption. Yet Americans still have difficulty accepting the idea of constraints. The myth that there will always be "more than enough" still grips our imagination, says D.J. Waldie, a Lakewood, California city official (New York Times, 1/28/01). "Limitless power has always been part of the California dream," says Waldie. "In the 20th century, the dreamers said hydropower would flow endlessly from streams of the Sierra Nevada foothills, oil fields would be discovered and nuclear technology would make electricity too cheap to meter."

There is, however, a cost to everything. No choices are free of all constraints. Yet must the constraints slap us in the face without warning? Must they always seem to contradict the myth of eternal abundance? Or may we avoid slaps in the face and shocking contradictions to a misguided faith by choosing to give up the false myth and choosing to participate ahead of time, wisely and carefully, in constructing good constraints? One way to do this is to choose (vote for) gradually increasing energy taxes that are invested in ways that help to balance consumption and constraints. The aim is to encourage a way of life that is sustainable—sustainable environmentally, economically, and in energy capacity.

Our proposal is first for the federal government to remove all fuel subsidies and then gradually to raise the tax on all nonrenewable energy. For example, every barrel of oil out of a pipeline from Mexico or Canada, or off a ship from another country, or pumped from under U.S. soil should get the same tax. This tax should be applied slowly, at a rate made known years in advance, so people can plan their choices. One suggested rate is an increase of $4 per barrel every year for the next ten years. This is roughly the equivalent of 10 cents per gallon per year, eventually adding a dollar a gallon to gasoline prices. That's still lower than in many other countries.

What should the federal government do with this new tax revenue? Use of the revenue should be determined at the outset. For example, the amount consumers now spend on energy does not cover the full cost of its actual production and consumption. The new tax revenues could go to help pay the cost of public infrastructures such as roads and bridges. The revenues could help fund energy and pollution research as well as investment in public transit. They could be spent to help constrain environmental degradation.

If energy taxes were increased over time, avoiding sudden jumps, automobile manufacturers, for example, could still make any type of vehicle they thought people would buy, and people could still buy what they wanted. But as fuel prices increased, people would tend to buy more fuel-efficient vehicles and manufacturers would choose to meet those demands. Higher prices would also encourage less driving. Commuters might discover that car pooling is not so bad. Some people would choose to live closer to their work, while others might do more work at home. More people might commute by bicycle in good weather. In time, deteriorating public transportation systems might be revived.

All of these actions would be the result of free choice, encouraged by higher fuel prices that consumer-citizens have chosen for themselves, rather than the result of fateful shocks and surprises they could not anticipate. Instead of being disappointed every time a "crisis" contradicts their treasured myth of eternal abundance, they would begin to see the connection between their consuming choices and their constraining choices.

America consists of more than consumers and suppliers. The United States is constituted as a republic, whose citizens share a public trust. Government is not merely an arbiter of private choices but the representative authority that governs the commons that belongs to all of us and to our children. The wrong kind of taxes or excessive taxes are burdens that should indeed be reduced. But the right kinds of taxes are essential means by which we choose to enhance, guard, and enjoy public life. And a healthy public commons is the best kind of constraint within which to make our personal choices.

[Dr. Huff is recently retired from the Department of Bio-Resource Engineering at the University of Maine, Orono. Dr. Skillen is president of the Center for Public Justice.]