Hunter Lovins helped found and manage the Rocky
Mountain Institute, famous for turning conventional wisdom
about energy on its head. She’s still changing minds in the
worlds of business, nonprofits, and government, showing a more
sustainable path to prosperity Anyone remotely aware of world events
realizes that it is time to quit nibbling at the bullet and
get off our dependence on oil. The United States imports 11
million barrels of oil each day, more than half of our
20-million-barrel daily habit. At $40 plus a barrel, we’re
spending more than $800 million a day to import oil. The
carbon emissions from burning all this fuel amount to about
600 million metric tons. The cost of the war in Iraq is more
than $1 billion per week.
But is it possible to get
off oil?
Yes, it is possible. The key notion that makes
getting off oil possible is counter-intuitive: the best and
cheapest “source” of energy is not in fact supply, but
efficiency. Any effort in these directions will save money,
increase American national security, and help protect the
environment.
Isn’t author Paul Roberts right that we
have reached “The End Of Oil?” as his book title suggests? It
is a corollary of the round-earth theory that we will run out
of the stuff, ultimately. But in the meantime, there simply is
a huge scope for using less of it.
Prospecting for an
energy future
For several decades, more efficient use
has been the biggest source of new energy—not oil, gas, coal,
or nuclear power.
More efficient use of energy enabled
Americans after the 1979 oil shock to cut oil consumption
15 percent in six years while the economy grew
16 percent. These efficiencies were achieved by more
productive use of energy (better-insulated houses,
better-designed lights and electric motors, and cars that are
safer, cleaner, more powerful, and get more miles per gallon).
By 2000, the energy service provided by that increased
efficiency was 73 percent greater than total U.S. oil
consumption, five times domestic oil production, three times
all oil imports, and 13 times Persian Gulf oil imports. Since
1996, saved energy has been the nation’s fastest-growing major
“source” of energy.
In nearly every case, energy
efficiency costs far less than the fuel or electricity it
saves. It costs only about 2 cents per kilowatt hour to save
energy. (Once we’ve made the easy savings, those costs will go
up. However, up to half the energy now used could be saved for
that price.) Almost no form of new supply, and few historic
ones, can compete with this.
The 40 percent drop in
U.S. energy intensity (energy consumption per dollar of real
GDP) since 1975 has barely dented the potential. The U.S.
annual energy bill is about $200 billion lower today than it
would have been had we not improved energy efficiency. Yet we
are still wasting at least $300 bil--lion a year, and the
potential savings keep rising as smarter technologies promise
more and better service from less energy. What’s even better
is that while the side effects of increasing supply are almost
uniformly harmful, the side effects of efficiency are
beneficial. For example, studies show labor productivity is 6
to 16 percent higher in energy-efficient buildings.
Efficiency just keeps on winning
Markets are
motivated by price, information, and consumer values. After
1979 there was a perception of crisis. Energy prices spiked.
People sought information. When the government, utilities, and
various non-profits supplied it, the market mechanisms worked
rapidly to “solve” the energy crisis. Efficiency brought
demand down, and prices crashed.
Those advocating
development of new sources of energy supply were back at
square one, the falling price of oil having diminished the
relative attractiveness of their pet technologies compared to
energy efficiency, which can be implemented more quickly and
at lower cost.
This persistent oscillation has
repeated itself at least four times since the 1973 Arab Oil
Embargo, and will do so again. This fuel bazaar will continue
to result in bankrupt supply companies, energy vulnerability,
a climate that grows less stable by the year, and continued
war in the Middle East.
Avoiding this cycle of
boom-and-bust requires understanding its three root
causes:
• Efficiency costs far less
than energy supply, so given the choice, most people “buy” it
instead. • Policies that promote both
efficiency and supply risk getting both—customers will
typically use only one (usually the cheaper one), idling the
other. • Efficiency measures are faster
to implement than new supply. Ordinary people are able to
implement efficiency long before big, slow, centralized energy
generation can be built, let alone paid for.
How not to
make energy policy
The best way to get off oil and
implement an energy policy that will give us abundant
affordable supplies of energy is to use what we already have
dramatically more productively.
The last time this
approach was tried, the imposition of CAFÉ (Corporate Average
Fuel Efficiency) standards for vehicles enabled the country to
reduce oil purchsing faster and on a larger scale than OPEC
could adjust to. New U.S.-built cars increased efficiency
seven miles per gallon in six years. Europe achieved similar
savings through higher fuel taxes. Together these changes
tipped the world oil market in buyers’ favor. Between 1977 and
1985, U.S. oil imports fell 42 percent, depriving OPEC of
one-eighth of its market. The entire world oil market shrank
by one-tenth; OPEC’s share was cut from 52 percent to 30
percent, driving down world oil prices. The U.S. alone
accounted for one-fourth of that reduction.
Between
1979 and 1986, Americans cut total energy use 5 percent—an
intensity drop that was five times greater than the expanded
coal and nuclear output subsequently promoted by President
Reagan’s policy.
Upon entering office in 1981, Reagan
sought to stimulate fossil fuel and nuclear energy supplies
without realizing that prior efficiency efforts were already
enabling the U.S. to cut energy intensity at the record pace
of 3.5 percent per year.
Five years later, energy
efficiency—disdained as an intrusive sacrifice and a
distraction from America’s supply prowess—had eliminated the
demand that was supposed to pay for costly supply expansions.
Many of the producers Reagan intended to help were ruined, as
efficiency’s speed and availability made energy prices crash
in the mid-1980s.
Despite Reagan’s concerted
campaign to undo efficiency programs, by the mid-1980s,
entrepreneurs were bringing on myriad technologies that led to
a huge gush of efficiency. Advocates of renewable supply were
similarly caught off guard, hampered, too, by inept government
programs to subsidize renewables. But the real determinant was
that efficiency was simply cheaper than any form of supply.
This history echoed eerily in 2001 as the Bush
administration sought with similar ardor to stimulate energy
supplies, even though in 1996 the United States had quietly
resumed saving energy at the rate of 3.2 percent a year. They
called again for opening the Arctic National Wildlife Refuge
and proposed massive fossil and nuclear subsidies. Subsidies
and other encouragement for gas-guzzling cars had reduced
average fuel efficiency of U.S. cars and trucks to a 22-year
low in 2002: 20.4 m.p.g. The average fuel efficiency of Ford
cars and trucks is now worse than when the company started 100
years ago with the Model A.
In 2001, the U.S. National
Academy of Sciences reported that cost-effective efficiency
efforts could roughly double U.S. fleet efficiency without
compromising safety or performance.
It is tempting to
say that the recent run-up in prices will finally drive even
fans of SUVs to rethink their addiction.
It won’t.
As the price gets higher—and somewhere over $30 a
barrel is enough to get people’s attention—substitution begins
to occur. With the lessening of demand, price begins to drop.
As prices fall, people are all too happy to resume
apathy.
Moreover, advertising campaigns (and tax
subsidies) that encourage Americans to buy a 10 m.p.g. Hummer2
so that they can paste an American flag on it and feel that
they are patriotically supporting the troops, ensure that
young men and women will yet again be placed in harm’s way,
driving 0.5 m.p.g. tanks and 17 feet-per-gallon aircraft
carriers.
While American car companies resist making
their products more fuel-efficient, the Japanese and Europeans
are designing the future. The Toyota Prius hybrid-electric
5-seater gets 48 m.p.g.; Honda’s Insight gets 64 m.p.g. If all
Americans drove cars that efficient, we would save 32 times
the amount of oil that proponents of drilling in the Arctic
wilderness hope to find there. Daimler Chrysler and General
Motors are testing family sedans at 72 to 80 m.p.g., and
Volkswagen sells Europeans a 78-m.p.g. four-seat non-hybrid
subcompact.
Almost every automaker at the recent Tokyo
Auto Show displayed good hybrid-electric prototypes, some
getting 100-plus m.p.g. VW has just premiered an ultra-light
but super-safe diesel car that gets 237 miles per gallon.
Catching hold
There is a lot of progress
underway, much of it happening because of concern over climate
change, not because of oil prices, but the two go
hand-in-hand.
• In 2000 British
Petroleum became one of the first major companies, and the
first oil major, to announce a commitment to reduce its
emissions of carbon dioxide by 10 percent below 1990 levels by
2010. In 2002, BP announced it had already achieved this
goal—eight years ahead of schedule. Doing so is saving the
company $650 million, and senior officials now say that even
if doing it cost them money, it would be worthwhile because it
makes them the kind of company that the best talent wants to
work for.
• DuPont has set itself
the goals of reducing its greenhouse gas emissions by 65
percent and getting 10 percent of its energy and 25 percent of
its feedstocks from renewables by
2010.
• STMicroelectronics went them
even better, announcing a goal of zero net CO2 emissions by
2010 with a 40-fold increase in production. By the time
they’re done, they reckon they will have saved almost $1
billion. This commitment has driven corporate innovation,
taking them from the number 12 chipmaker in the world to the
number six.
• Swiss Re, the major
European re-insurer, is saying that if your company does not
take its CO2 footprint seriously, our company may not want to
insure you. Or your officers or directors.
Perhaps the
most exciting news is the recent creation of the Chicago
Climate Exchange. When it became clear that the U.S. Senate
would refuse to ratify the Kyoto Protocol, many of us who
favor market-based solutions to environmental problems felt
gloomy. Richard Sandor, who describes himself as a humble
economist, refused to give in to the despair. He said,
“Governments don’t make markets, traders do. I’m a trader,
let’s make a market.”
And he’s done it. On December 12,
2003, the Chicago Climate Exchange (CCX) started to trade the
right to emit carbon; as of July 21, it was trading at 98
cents a ton. The original 14 companies who joined were not a
bunch of wooly-minded environmentalists. They included
American Electric Power, Ford Motor Company,
STMicroelectronics, Dupont, Motorola, and the City of Chicago,
significant economic players, all.
Although in the
U.S. the right to emit carbon is still free, these companies
were betting that inter-national regulations of carbon
emissions were coming soon and they would be better off
preparing for it. All felt, with Richard, that this was an
opportunity to use the market to help solve what is now being
called the most challenging problem facing the
planet.
Hunter Lovins is the co-author, along with
Amory Lovins and Paul Hawken, of Natural Capitalism: Creating
the Next Industrial Revolution, and a consultant on these
issues. She can be reached through Natural Capitalism
Incorporated, www.natcapinc.com
