Energy Policy Context
Climate-friendly Energy Policy: Options for the Near Term
Energy Policy Context
A discrete and unified U.S. energy policy does not exist. Rather, policies affecting energy production and use in the United States have many sources and take a multitude of forms. For example, while this brief focuses primarily on federal energy policies, state and local governments also play a key role in regulating energy-related activities. In addition, while there are federal policies aimed directly at achieving energy objectives, there are also federal policies aimed at achieving other objectives—ranging from environmental protection to easing traffic congestion—that have indirect but nevertheless substantial impacts on energy production and use. Finally, even those policies aimed squarely at achieving energy-related objectives are shaped by other policy concerns, such as labor and foreign policy issues. Energy policy, in short, operates in multiple dimensions.
Historically, most major shifts in U.S. energy policy have been triggered by interruptions, and subsequent price increases, in crude oil supply. Such events occurred in 1973 (Arab oil embargo), 1979–80 (triggered by the Iranian revolution), and 1990 (associated with the Persian Gulf War). The policy prescriptions for reducing supply vulnerability have included increasing U.S. production of conventional and alternative fuels, emphasizing market forces, reducing demand through efficiency measures, establishing and maintaining the strategic petroleum reserve (SPR),8 and maintaining international arrangements under the International Energy Program (IEP) to coordinate petroleum stock drawdowns. Over the years, the United States has reduced its vulnerability to a physical interruption of crude oil supplies but economic vulnerability remains. U.S. oil imports continue to grow, and the OPEC countries continue to be the source of significant oil imports, leaving the transportation sector in particular—and the economy in general—exposed to supply and price risk.
Today’s energy policy debate confronts a mixture of old and new issues. The United States remains vulnerable to concerted action by oil-producing nations to curtail production and increase prices. Conflicts in Central Asia and the Middle East have brought fuel supply concerns again to the fore. Moreover, the events of September 11, 2001, have given rise to a new energy policy priority: Securing domestic energy facilities from terrorist attack. In addition, sharply increased rates of U.S. economic growth in the late 1990s exposed energy supply shortages, as well as transportation and transmission bottlenecks. The deregulation of the electric power industry in some states has created regulatory idiosyncrasies that have sharply increased prices of electricity in some regions.9 Furthermore, current U.S. energy policy is much more market-oriented, less focused on cost-based price regulation, and more focused on environmental regulation than it was in the 1970s.
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