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A Call to Arms: A Manifesto for Tackling Global Warming and Oil Addiction

By Vijay V. Vaitheeswaran '90

Photo: ©iStockphoto.com/Sean Locke, Digital Planet Design

The world is at an energy crossroads, and the decisions made about cars and oil in America and China over the next decade or so will set the course for the coming century. That is because energy infrastructure, be that automobile factories or petrochemical refineries, can last for decades, and the greenhouse gases emitted can last even longer. If we are to set our energy system on the right course before real crisis hits in a decade or two, we need to start that transition now.

It is not only far-flung island states—ranging from Iceland to Hawaii and Vanuatu—concerned about pricey petroleum imports that could embrace a clean-energy future. And it is not just places with hyper-green economies like California and Sweden that could declare a firm goal of becoming completely independent of petroleum. America's industrial heartland could leapfrog ahead too.

The key obstacle now is Washington's backward-looking, obstructionist approach to energy—a pork-barrel fiesta that Senator John McCain has called the "leave no lobbyist behind" approach. That has led some to despair that nothing good can ever come out of Congress on energy, given the power of the oil and car lobbies. Techno-utopians argue that magical new technologies will save us, while market fundamentalists say that the invisible hand will do the trick. Well-intentioned corporations keen on clean energy and carbon-free technologies make the argument that corporate social responsibility, not public policy, is the key. And small-government types are suspicious of Washington anyway.

Here is why all of these groups are wrong. When it comes to the thorny geopolitical, environmental, and economic complications involved with cars and oil, America's federal energy policies do matter. The heady mix of perverse subsidies for fossil fuels and the absence of proper externalities taxation of gasoline leaves the game rigged in favor of Detroit and guarantees continued oil addiction. This will not change magically unless the incentives facing entrepreneurs and innovators change: clean technologies will not get their just rewards in the marketplace, and new markets for carbon-free energy will not take off, unless we fix what's wrong with energy policy so that the playing field is level.

After all, as Milton Friedman argued famously several decades ago, the business of business is business—as it should be. Contrary to what some critics claim, there is nothing inherently evil about oil companies pumping oil or carmakers selling cars. Those are, in fact, their jobs—and for decades, it was socially acceptable for them to do so. The difference today is that society's expectations are changing: a richer, greener, better-informed world is demanding much more from its energy and transportation industries. The social contract is evolving—but public policies have not yet changed to reflect that progress.

That, in sum, is why government still matters. Only sensible and courageous action by government to take account of the external costs of burning oil can set things on the right course. Those external costs are not reflected in the pump price of gasoline, but of course we pay for them through the Pentagon budget, the suffering of asthmatic children, and the pain of economic shocks. Only if the federal government spurs change, either through market-based regulation or, better yet, through carbon taxes, will we level the playing field and give clean cars and carbon-free energy a fighting chance. That will happen only if everyone is ready to abandon the myth of cheap fossil fuels and pay an honest price for gasoline.

There are signs that the Great Awakening is changing consumer attitudes on this crucial issue too. Ask ordinary Americans if they will simply support a hike in gasoline taxes, as the New York Times did in 2006, and the majority say no. But when the pollsters asked whether those same people would be willing to support higher gasoline taxes if the money went to reduce oil imports or to fight global warming, a strong majority responded yes. That suggests that the country is just ripe for a new approach to this issue. The next president and Congress should embrace an energy policy that includes these principles:

1. Americans need to pay honest prices for fossil fuels. The cost of gasoline must reflect the true cost to society imposed by its environmental, geopolitical, and economic harm. The best way to accomplish this is through revenue-neutral taxation and the elimination of subsidies, which would level the energy playing field so that clean alternatives finally have a fighting chance.
   
   
2. The business of business is business. Don't expect corporations to act out of goodwill, charity, or corporate social responsibility to tackle oil addiction. There is nothing immoral or surprising about oil companies selling oil or car companies selling SUVs, and voluntary schemes and claims of being beyond petroleum should be disregarded. If Americans want companies to move beyond oil, they must change the social contract through government action.
   
   
3. Leave it to the market to pick the winners. The temptation is strong, especially among moon-shooters clamoring for an Apollo-type project for clean energy, to look to the government to back promising technologies. However, history shows this is a formula for disaster. No group of officials, no matter how benevolent or well funded, can match the dynamism of markets and entrepreneurs in coming up with innovative technologies and business models that best meet consumers' needs.
   
   
4. Government must act. While bureaucrats should not push favored technologies, the conventional laissez-faire argument for government to do nothing falls short. There is a clear case for government intervention in energy and environmental policy due to the costly externalities involved in burning fossil fuels. In addition to externalities pricing, there is a strong case for specific regulations (such as a market-minded substitute for the federal fuel-economy standards) and especially for investment in the much-neglected areas of technical education and basic energy research.
   
   
5. Individual action is the essential catalyst for change. The key to driving change in America's political system is grassroots rebellion. As individuals and communities come together as part of this Great Awakening to demand better from the country's leaders, political leaders of vision will at last have the chance to step forward and answer their call.

If the next president and Congress have the courage to craft a new energy policy based on this market-minded manifesto, America may yet prove the petro-pragmatists wrong by leaving oil behind long before the world runs out of it.

Will it really happen? I believe Americans will follow political leaders with vision and courage, who put forth a comprehensive, bipartisan, long-term strategy to tackle oil addiction and global warming. No one likes to pay taxes, but Americans do respect straight talk and have always had a strong sense of fair play. If political leaders take the trouble to explain the notion of oil's external harms and make the case for subsidy and tax reform, citizens will rally to the cause.

And if the next president and Congress really do embrace an innovative policy and stop propping up the tired old giants of the fossil-fuel and automobile businesses, then radical change will be possible. Entrepreneurs and innovators would then ramp up their investments, and we could see a technological revolution that makes clean, efficient, gasoline-free cars possible so that the developing world's legitimate needs for energy and aspirations for mobility can be satisfied, while the rich world's concerns about the environment are met too.

But Washington, DC, will act only if ordinary Americans—voters, consumers, drivers one and all—speak up, step out, and demand an end to business as usual. As Saint Thomas Moore argued five centuries ago, government is simply too important an enterprise to leave to the scoundrels; it is the duty of honest, everyday folk to get involved and to make sure our country heads in the right direction.

The challenges are daunting, but the solutions are within grasp if readers mobilize and energize the political process in favor of clean energy. Indeed, there is every chance that they can turn this crisis into opportunity, transforming the grease and grime, soot and sulfur industries that built the twentieth century into the clean, sustainable building blocks of the twenty-first century.

The global race to fuel the car of the future is on.

About the Author Vijay V. Vaitheeswaran is an award-winning correspondent for The Economist and co-author, with colleague Iain Carson, of the book Zoom: The Global Race to Fuel the Car of the Future (Twelve, 2007), which has been named a Book of the Year by the Financial Times. He is also the author of Power to the People (Farrar, Straus and Giroux, 2004). He joined the Economist as the London-based Latin America correspondent in 1992 and opened its first office in that region in Mexico City, serving as bureau chief until 1997. As the magazine's global environment & energy correspondent, he covered the politics, economics, business, and technology involved in those topics from 1998 to 2006. He is a term member of the Council on Foreign Relations and teaches at NYU's Stern Business School. He is also a regular commentator on Marketplace radio, in the Wall Street Journal, and with other media outlets. He holds a degree in mechanical engineering from MIT.

Published February 2008

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