Previous chapters discredited these myths: that we will wreck the economy, that peak oil will herald doom, and that miracles are imminent. Other chapters explored why it is foolish to ignore climate change or shun money-saving policies. Leaving these misconceptions behind, I will now sketch a Core National Energy Plan that is cautious yet powerful.
Part 3 of this book lays out details of the plan. So if you find the workings of the untax, or the race to fuel economy, a bit puzzling, don’t be surprised. There are a few tricks to good economics, and the full explanation will make more sense after a closer look, in Part 2, at how energy markets work.
The core energy plan flows from basic principles. A good design does not rely on incredible advances in technology. Instead, a good design requires that a plan be
• Simple.
• Cost effective—a bargain.
• A treatment for the disease, not just for the symptoms.
Simplicity helps prevent mistakes and gaming. I have learned this repeatedly in my work diagnosing and adapting electricity markets. I have also learned that this principle is seldom respected in practice. But simplicity is still the right way to begin.
Asking for a bargain may seem superficial, but, in fact, that is exactly what economists mean when they call for “efficiency,” their primary objective. The cost of saving a certain amount of oil or carbon should be as low as possible.
Unhealthy energy markets—ones that are inefficient and do not reflect social costs—develop symptoms such as gas-guzzling cars, too few wind turbines, and too many coal plants. The symptoms are the ways energy is wasted. The underlying disease involves “market failures”—basic problems with how the market works. Treating the symptoms—for example, by subsidizing ethanol—often causes unwanted side effects. And there are just too many symptoms to treat them all one by one. A better approach is to identify underlying causes—aspects of the market that are broken—and treat those rather than the symptoms.
