Tuesday, June 24, 2008

Bio-fuels, Mandates and Energy Policy

Here is an article from the spring of 2007 that investigates bio-fuels and public policies that affect their development and production.

The fact that current policy increases energy security and reduces greenhouse gas emissions does not imply, however, that we cannot do better. History has demonstrated that policy objectives can be met most efficiently when private entrepreneurs are allowed to determine the means by which objectives are achieved. So, for example, if the United States has an objective of diversifying its energy sources at minimum cost, Congress should specify a numerical diversification target, the types of energy sources that count toward diversity (would increased coal and nuclear energy qualify?), and the penalties for non-achievement. Competition between alternative energy sources would reveal the most efficient set and allow the United States to meet its policy objectives at least cost. If Congress truly wants increased energy security, then Congress should be neutral to the means by which this is achieved.
The article highlights some possible changes in current policy, ultimately suggesting a BTU tax credit that would help any alternative energy source.

I tentatively agree with the main points of this article. However, I think there probably should be a inclination towards liquid fuels. Liquid fuels currently provide the necessary energy density for our transportation needs. Electric and hydrogen vehicles cannot yet fulfill the same requirements at a similar cost. Also, there will be much debate on whether "clean" coal and nuclear are considered alternative energy and/or suitable environmental substitutes.


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