The President's Energy Policy

Friday, January 26, 2007

ANTICIPATING Tuesday's State of the Union speech, Al Hubbard, President Bush's national economic adviser, spoke of "headlines above the fold that will knock your socks off in terms of our commitment to energy independence." The address that Mr. Bush delivered certainly was bold. But by choosing energy independence as his main policy target, Mr. Bush missed opportunities to improve energy security and to combat climate change.

The president was on firmest ground with his call for stricter fuel economy standards. His administration has already increased the standard for light trucks by executive order, but it lacks the authority to do the same for cars; he has asked Congress to step forward. The standards that the president supports are weaker than they could be because they aim to improve the fuel efficiency of each category of car rather than also prodding manufacturers to build smaller cars in greater numbers. Still, Mr. Bush called for an improvement of 4 percent per year in the miles-per-gallon rating of new vehicles. If enacted without loopholes, this would reduce the nation's vulnerability to oil shocks and slow global warming.

Mr. Bush also used his speech to propose a shift away from gasoline toward alternative fuels. The nation's cars and trucks already burn about 4 billion gallons of non-gasoline fuel per year, and current law requires fuel blenders to boost that quantity to 7.5 billion gallons by 2012, which they will do by stepping up the use of corn-derived ethanol. This replacement of oil with corn ethanol reduces oil imports but cuts carbon emissions only slightly. Mr. Bush now proposes to shoot for fully 35 billion gallons of alternative fuel to be used annually by 2017. Where could this extra fuel come from?

Corn-based ethanol can't provide more than 15 billion gallons to fulfill the mandate, since there's a limit to the land available to plant corn, and livestock farmers are already complaining that the price of corn feed has been driven up by the ethanol mandate. In an ideal world, the other 20 billion gallons of alternative fuel might come from ethanol distilled from switch grass and other plant material; this "cellulosic" ethanol has the potential to cut carbon emissions far more substantially than the corn-based variety. But cellulosic ethanol remains an unproven technology. Unless that changes, Mr. Bush's alternative fuel standard could open the door to oil derived from coal -- an option that's known to work but that would be far worse for global warming than burning traditional gasoline.

The president's other energy proposal was to double the size of the Strategic Petroleum Reserve, which insures against the risk of an oil supply disruption. This is where the focus on energy independence obscures true energy security. In the face of the danger of oil price shocks, what matters is not the size of oil reserves in the United States but the size of such reserves globally. U.S. energy security depends, for example, on whether India has a reserve that it could tap in the event of a sudden shortage: If it doesn't, India will respond to a shortage by buying more oil on world markets, forcing up global oil prices and hitting motorists on the Beltway. Mr. Bush's unilateral solution -- build a bigger oil reserve at home -- is hugely expensive and less likely to be effective than an effort to energize existing diplomacy aimed at bringing the Indians and Chinese into the system of strategic oil reserves coordinated by the International Energy Agency.

Congress should embrace Mr. Bush's call for higher fuel efficiency standards and treat his other ideas cautiously. In particular, it should not use his alternative-fuel target as an excuse to throw yet more subsidies at corn-based ethanol -- a policy that farm-state members will find tempting as they write this year's farm bill. Instead, Congress should press ahead with legislation aimed squarely at slowing climate change. That, not independence, should be the top priority for energy policy.

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