Another bravura performance by the world's best-known and most compelling energy guru. But something didn't click this time. The audience was attentive but passive. When Amory finished, there was no applause.

Perhaps it was decorum — with a governor and a former CIA director up next, the crowd might have been stunned by the gravitas of it all. But something else may have been at work: disbelief.

Three decades ago, Amory unveiled his visionary "soft energy path" in which ubiquitous efficiency and widespread "renewables" would trump coal, oil and nuclear. But in those thirty years something has gone dreadfully wrong. The U.S. uses 25% more oil, burns 75% more coal and generates 35% more greenhouse gases than it did in the mid-1970s.

And with China and India embarking on the same "development" path, the future of global energy use looks very bleak indeed. Weekly hurricanes and vanishing Arctic ice have suddenly served notice that global warming is no far-off threat but the terrifying new normal.

Yet be of good cheer, Lovins advises. "The U.S. improved its GDP-to-oil ratio by 5% a year from 1977 to 1985; we can do it again." What Amory doesn't say is that the lion's share of that gain came not from efficiency but from utilities' and factories' replacing oil with cheaper coal and natural gas — a "one-shot" with no encore and with its own severe environmental costs.

Lovins insists that what he calls "technical efficiency" can be increased many-fold without taxing energy to raise its price. High fuel prices are helpful but not "dispositive," he told me the day after he spoke at NYU, citing institutions like Dupont Corp. and Seattle City Light that slashed energy use in the 1990s even as fuel prices were falling. Sure, and every so often, a charismatic principal can turn around an impoverished school despite 35 kids per class. Meanwhile, without structural reforms like smaller classes, the hundreds of other schools languish.

Likewise, though Amory has been evangelizing "the soft path" for thirty years, his handful of glittering successes have only evoked limited emulation. Why? Because after the price shocks of the 1970s, energy became, and is still, too darn cheap.

It's a law of nature, I'd say — or at least of Economics 101: inexpensive anything will never be conserved. When water's cheap, we'll let the faucet run and the hose leak and let our washing machines and suburban lawns gobble the stuff.

Same with energy. A billion and one decisions collectively determine aggregate energy use, and almost all, from instantaneous behavior choices to 50-year investments, turn on the price of energy.

So long as energy is cheap, Amory's magnificent exceptions will remain just that. Thousands of highly-focused advocacy groups will break their hearts trying to fix the thousands of ingrained practices that add up to energy over-consumption, from tax-deductible mortgages and always-on electronics to anti-solar zoning codes and un-bikeable streets. And all the while, new ways to use energy will arise, overwhelming whatever hard-won reductions these Sisyphean efforts achieve.

But if we make fuels expensive — really expensive, as befits the climate wreckage and political violence that oil and coal cause — then everything changes.

With steep fuel taxes, best implemented in the form of steadily rising carbon taxes, the full potential of technical efficiency that Lovins rightly touts will finally be factored into those billion and one decisions.

How to equitably tax energy is a subject for another time; from a political standpoint, the secret is tax-shifting (e.g., in the U.S., phasing out sales and social security taxes as fuel taxes kick in). The mechanisms are well-understood; it's not a technical problem. What's lacking, so far, is a broad coalition committed to putting energy taxes on the political map, starting with environmentalists and "security hawks" and reaching out to the six billion other equally endangered souls clinging to our besieged planet.

We need to jump-start this coalition now. Who better to lead the charge than Lovins? Amory, are you listening? It's time to change the tune — or at least modulate into a different key.

Komanoff, an economist and environmental activist in New York City, collaborated with Amory Lovins in the 1970s and 1980s. For more, see komanoff.net.

 

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Sallan | News and Views | Snapshot | C. Komanoff | Comments

Is it time for Amory Lovins to learn a new tune?
Readers weigh in

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November 7, 2005

Charlie, I think you have asked a key question, which from where I sit is: Will "getting prices right" alone be sufficient as an energy policy? The unspoken assumption behind most Congressional and Administration inaction in recent years is that free markets will do the job, and government interference is therefore not needed.

After almost three decades of the political-economic pendulum swinging in the direction of free markets and deregulation, I think we are at a point where clean energy policy advocates need to articulate a clear and compelling arguments for the limitations of market forces as policy solutions, and for a more engaged government role in balancing energy markets with judicious policy action.

To do that, I think we need to speak the language of neoclassical economics. We need to define market barriers (eg. principal-agent, externalities,and transaction costs) that economists acknowledge as legitimate. And we need to point out the non-barrier economic forces (eg. income elasticities and cross elasticities) that work counter to price elasticity.

Then we need to engage more and more "mainstream" economists in this kind of dialogue. We need to get more visible on the main stages of the economist/policy analyst world, ie. journals and forums, and make this case.

We have an IEA project, due to be finished next year, which is aimed at quantifying the effects of market barriers, in terms that IEA economists will believe. We also have some modest funding to hold forums and publish on the key economics modeling issues that hobble the proper quantification of energy efficiency's economic benefits.

I think this and related work is needed to crack the wall of denial that exists in the economics profession on these issues. If we can reframe that debate, I think that creates a new platform for advocacy on climate and a host of other clean energyissues.

So thanks for your post, and let's continue the discussion. That said, an endless thread on this listserv may not be the best way to do it. Perhaps those interested in a more extended dialogue on these issues should send us emails offline. I'll be happy to develop a self-selected list of interested parties for future discussions.

Bill Prindle
Deputy Director American Council for an Energy Efficient Economy
bprindle@aceee.org
aceee.org

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November 8, 2005

Bill, Charlie, et al:
I'd be pleased to participate as well. One of the issues with neoclassical economics is the assumption that price clears all markets, and therefore there are no "market barriers" as we understand them in energy efficiency. It will be necessary either to (a) show that the price needed to overcome all the many market barriers to efficiency is, as Bill said, extraordinarily and unacceptably high, or (b) to step outside that aspect of the neoclassical box. Politically, it has worked to step outside that box, as regulators in approving DSM programs have seen that (a) is true and that (b) is a valid approach - look at the market barriers directly, and try to overcome them.

Regulators know they can't raise prices enough to stimulate more efficiency without losing their jobs (and the legislatures will overturn those price signals quickly, too — I've seen it happen a few times). Congress surely understands implicitly that relying on price signals is not going to work, because they steadfastly try to lower price signals (except when they're giving tax breaks to their friends in the energy industries, but they hope no one notices).

My interest in Pay-As-You-Save(r) comes directly out of the examination of market barriers, and a recognition that bringing first-costs down does not overcome market barriers for many potential buyers of efficiency measures/products. There are structural problems with the efficiency markets, and these can be ameliorated by bringing down the price of efficiency relative to energy consumption, but only for some customers and not enough to be satisfied to leave the state of the market there. There were structural barriers in home sales and auto sales and major consumer appliance sales, too, and changes to the primary and secondary markets and financing vehicles for these items helped to revolutionize them. In effect, those institutional changes were necessary in order to allow price signals to be acted on by consumers. So I believe it is with efficiency.

In the end, I'd challenge the assumption of this exercise that what is needed is to speak in the language of neo-classical microeconomists. I think rather what is necessary is to point out the limitations (and implications) of a strictly neo-classical, price-based approach, ignoring barriers caused by imperfect markets.

Nancy Brockway
Board Chair
PAYS America, Inc.
nancy@paysamerica.org

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November 14, 2005

Charlie,
I finally got aroundto reading your Sallan piece. I agree. Also I don't regard your position as antithetical to Amory's, and so would challenge the false dichotomy that was discussed in the e-list a few weeks back.

As for your penultimate paragraph ...

I would only note that the security hawks are, I believe, much less interested in security truly than they are in projecting American power around the globe. I went to the Fletcher School. Those guys are crazy, and their thinking is rarely amenable to rational analysis and discourse. Richard Perle, Paul Wolfowitz, et al. simply can't see energy efficiency as an instrument of foreign policy, since to do so is to acknowledge the greater bankruptcy of their ideology (although, as an exception to prove me wrong, Charles Krauthammer, insipid though he is, recently made the connection). But, it's still absolutely the right argument to make.

Regards,
Rick

Frederick Weston
Director
The Regulatory Assistance Project
Montpelier, VT, USA 05602
www.raponline.org