Green Car Congress: Lugar Blasts Inaction on the Transportation Energy Problem; Calls for Mandates If Necessary

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Lugar Blasts Inaction on the Transportation Energy Problem; Calls for Mandates If Necessary

29 August 2006

In the keynote address to the Richard G. Lugar-Purdue University Summit on Energy Security, at Purdue University, US Senate Foreign Relations Committee Chairman Dick Lugar (R-IN) called for a set of immediate actions to address US transportation energy vulnerability, including flex-fuel capability in all new light-duty vehicles, accelerated investment in cellulosic ethanol and the institution of more aggressive fuel economy standards.

Lugar asserted that none of the major stakeholders—the oil companies, the car companies, the Federal government, and US consumers—are taking the necessary, substantive actions to address what he calls a national security emergency.

Neither American oil companies, nor American car companies have shown an inclination to dramatically transform their businesses in ways that will achieve the degree of change we need to address a national security emergency. Most importantly, the Federal Government is not treating energy vulnerability as a crisis, despite an increase in energy related proposals.

...Unfortunately, although many Americans are embracing the idea of changing our energy destiny, they have not committed themselves to the action steps required to achieve an alternative future. This is an important distinction, because although national acceptance that there is a problem is a necessary condition for solving the problem, it does not guarantee that the problem will be solved.

In fact, advancements in American energy security have been painfully slow during 2006, and political leadership has been defensive, rather than pro-active. One can point with appreciation to a few positive trends...but these are small steps forward in the context of our larger vulnerability.

If our economy is crippled by an oil embargo, if terrorists succeed in disrupting our oil lifeline, or if we slide into a war because oil wealth has emboldened anti-American regimes, it will not matter that before disaster struck, the American public and its leaders gained a new sense of realism about our vulnerability. It will not matter that we were producing marginally more ethanol than before or that consumers are more willing to consider hybrids and other alternative vehicles.

Not all indices and measures of energy progress are even moving in the right direction. The American people are angered by $3.00 gasoline, but they are still buying it in record quantities.

Lugar described the energy dilemma in terms of six threats to national security:

The vulnerability of oil supply to natural disasters, wars, and terrorist attacks.
The increasing tightness of supplies and the associated rising cost of oil and natural gas as global consumption increases. “As we approach the point where the world’s oil-hungry economies are competing for insufficient supplies of energy, oil will become an even stronger magnet for conflict.”
The use of energy supplies as a economic weapon by adversarial regimes.
The transfer of energy payments to “some of the least accountable regimes in the world.”
The exacerbation of the threat of climate change, “made worse by inefficient and unclean use of non-renewable energy. In the long run this could bring drought, famine, disease, and mass migration, all of which could lead to conflict and instability.”
The burden of rising energy costs on developing nations, “with negative consequences for stability, development, disease eradication, and terrorism.”

Despite a growing awareness of the scope of the problem, and the shift to a “new energy realism”, far from enough is being done by any of the major actors involved, according to Lugar. Conflicting interests tend to cancel out meaningful progress.

Breaking through a political logjam often requires a crisis that focuses the nation in a way that achieves a consensus. But consider that the combination of September 11, 2001, the war in Iraq, the conflict on the Israeli-Lebanese border, the nuclear standoffs with Iran and North Korea, the Katrina and Rita hurricanes, sustained $3.00 per gallon gasoline, and several other severe problems have not created a consensus on energy policy.

This leads one to the sobering conclusion that a disaster capable of sufficiently energizing public opinion and our political structures will have to be something worse than the collective maladies I just mentioned—perhaps extreme enough to push the price of oil to triple digits and set in motion a worldwide economic downturn. None of us want to experience this or any of the nightmare scenarios that await us. It is time to summon the political will to overcome the energy stalemate.

Lugar outlined a national program that would include:

Making virtually every new car sold in the US a flex-fuel vehicle;
Ensuring that at least 25% of filling stations in the US have E85 pumps;
Expanding ethanol production to 100 billion gallons per year by 2025;
Creating an approximate $45 per barrel price floor on oil through a variable ethanol tax credit to ensure that investments keep flowing to alternatives; and
Enacting stricter vehicle mileage standards.

To break oil’s monopoly on American roads, some experts favor a giant leap in technology to hydrogen. But that will require new engines, new distribution systems, new production technologies, and is decades away from commercialization. Instead, we can start to break petroleum’s grip right now. The key is making ethanol as important as gasoline in our transportation fuel mix.

While Lugar suggested that initially the Federal government should work with car companies on achieving the goal of equipping all new vehicles with flex-fuel technology, he said that a failure to act should result in a Federal mandate.

...if car manufacturers do not respond with a sufficient plan in a short time period, Congress should mandate that all new autos sold in the United States have flex-fuel capability.

I do not suggest this lightly. But my observations of the post-Katrina response by car companies, oil companies, and consumers is that in the short run, the evolution of market forces won’t be capable of producing the progress that we need to achieve our national security goals, particularly since the car fleet turns over slowly.

Lugar also called for much more aggressive support for the development of cellulosic ethanol.

Far in the future, historians may point to the energy policy of the last several decades as the major national security failing of the American government in this era. In the absence of decisive policy changes, historians will rightly ask how the wealthiest and most powerful nation on earth with abundant land, a magnificent industrial infrastructure, and the world’s best universities and research institutions simply would not reorient itself over the course of decades despite repeated warning signs. Our failure to act will be all the more unconscionable given that success would bring not only relief from the geopolitical threats of energy-rich regimes, but also restorative economic benefits to our farmers, rural areas, automobile manufacturers, high technology industries, and many others.

We must be very clear that this is a political problem. We now have the financial resources, the industrial might, and the technological prowess to shift our economy away from oil dependence. What we are lacking is coordination and political will. We have made choices, as a society, which have given oil a near monopoly on American transportation. Now we must make a different choice in the interest of American national security and our economic future.

Resources:

Full text of Lugar Speech at Lugar-Purdue Summit on Energy Security

August 29, 2006 in Cellulosic ethanol, Ethanol, Fuel Efficiency, Policy | Permalink | Comments (67) | TrackBack (1)

Comments

"When it comes down to it, though, both solutions involve using government coercion to modify individual behavior, be it how much they can drive or what cars they decide to own. Frankly, that's just not the proper role of government."

You must be very unhappy with the US and every other government in the world, then, since all policies, to one extent or another, affect individual behavior. Calling this "coercion" is bombastic and incorrect.

The federal government allows tax deductions for mortgage interest. Are they "coercing" renters into buying?

Posted by: m | August 29, 2006 at 04:05 PM

That the Hon. Senator Lugar makes no mention of taxes is telling. The true statesman would point out the elephant in the room: it's obvious that market incentives work, but no one is willing to talk about them. We should junk CAFE and just raise fuel taxes significantly. Raise taxes in predictable increments to $2-3.00/gal. over a period of years (with matching income-tax credits for low-income folks). Everyone would adjust. Drivers would re-evaluate their needs and demand high-mileage vehicles. Automakers would provide same. Predicted reductions if fuel demand would calm the futures markets and possibly even reduce the base price of oil. Low carbon fuel would get lower taxes. This is not rocket science, yet no one is willing to take the lead. Our 'leaders' are pathetic.

Posted by: Nick | August 29, 2006 at 04:07 PM

Thanks, George, for injecting a little sanity and perspective
into this discussion. Webster should add a picture of this forum's audience beside his definition of the word 'tough'.

Dick Lugar is one of the few people at his level of seniority in
the federal government who has the slightest notion of the scope
and threat of peak oil. We should commend him for that alone -- if there were 99 other senators as aware of this problem as he
we would be well on our way to a diversity of solutions. If you
guys want to complain about senators please start with those
other 99 first.

A lot of folks here are focused on the deficiencies of corn
ethanol. Lugar is talking about cellulosic ethanol. I am not
a chemist or biologist, but I've read material written by
reputable academic researchers (Lee Lynd et al.) that makes
plausible arguments for the scalability and EROEI of cellulosic
ethanol. I have read similarly plausible opposing arguments.
Frankly I don't know who's right and I suspect no one else who
is lacking extensive education in genomics, organic chemistry,
etc., really does either.

If cellulosic ethanol technology is to succeed, however,
the groundwork being laid by corn ethanol producers and the people now creating ethanol distribution infrastructure
is critical. What does it matter if a few corn farmers (or
ADM stockholders for that matter) get rich? There have always been rich people, there will always be rich people. The only thing that matters to me is whether I'm rich enough to provide
my kids with food, shelter, medical care and education. The fact that whoever cracks the code of scalable renewable energy is guaranteed to become richer than Croesus may be the only motivation sufficient to bring the required amount of resources to bear on the problem.

Cellulosic ethanol and PHEV are not mutually exclusive. I own
a Prius and think there's a terrific future in PHEV. Hopefully
my next Prius will be a plug-in E85, and judging by statements
I've read from Toyota management that's quite likely to come
to pass. Ten years from now I hope to be injecting enough
juice into the grid from my future rooftop PV installation
to recharge my Prius at night for nothing under our utility's
net metering scheme, and when I drive more than 60 miles in a
day I'll use a couple of gallons of E85.

The next five to ten years, if we survive them, should tell us a lot more about the likely future viability of cellulosic ethanol, PHEV and biodiesel. When we know more we can make better-informed
decisions. In the meantime, I'll reserve my opprobrium for
those standing in the way of all solutions (there's more than
enough of them to exhaust my own personal vitriol supply)
rather than the few who actually understand the problem and
advocate a plausible albeit non-guaranteed solution. I applaud
Dick Lugar for his efforts.

Posted by: Roger Davis | August 29, 2006 at 04:22 PM

Nick: You said it.

Roger D.: The problem with enriching corn farmers and ADM is that the system gets biased toward those who have their hands in the till instead of those who are actually solving our problems. Have you noticed any of ADM's wealth going toward batteries, or even fuel cells? I haven't either, and it is no wonder: the higher demand goes (with low efficiency), the higher prices go and the more money they make. Since their money comes from taxes and mandates instead of competitive sales, they have every incentive to NOT solve the problem. Indeed, they have every reason to stand in the way of solutions.

Money-grubbing mendacity.

Posted by: Engineer-Poet | August 29, 2006 at 04:55 PM

And speaking of Lugar, there is no point in pushing E85 pumps anywhere until there is E10 ("gasohol") everywhere. That would take upwards of 14 billion gallons/year of ethanol, which we are along way from achieving (even if it did any good).

Posted by: Engineer-Poet | August 29, 2006 at 05:00 PM

You wrote:
And speaking of Lugar, there is no point in pushing E85 pumps anywhere until there is E10 ("gasohol") everywhere. That would take upwards of 14 billion gallons/year of ethanol, which we are along way from achieving (even if it did any good).
--------------------
That is probobly one of the smartest things I have read here. Since we are no wehre near using E10 everywhere we need to make alot more ethanol before we need to force stations to put out E85 pumps.

Can E10 be sent down regular pipelines?

Posted by: hampden wireless | August 29, 2006 at 05:37 PM

Every government involves some level of coercion, that is the inherent power of the state. But that power is only as much as the people allow it to have. Regardless, a regressive $3 national gas tax or the draconian rationing Patrick proposes both cross a line I think should not be crossed. Our goverment is messed up enough already without giving them even more of our own money to screw us over with.

Witness the massive subsidies and tariffs that make corn ethanol economical in the first place. The government's track record on energy matters is so bad that I do not want to give them yet another way to mess things up more, using my tax dollars.

Senator Lugar's sentiments are good, but the problems with promoting corn ethanol have been duly noted here.

It's still going to take massive private investment in new energy tech to break our dependence on forign energy sources.

Posted by: Cervus | August 29, 2006 at 05:44 PM

I like the discussion here. Two comments. I heartily agree with the statement that E10 everywhere makes more sense than E85 a few places. I think that may be closer than you think due to MTBE's rapid disappearance. I would also love to see B2 or B5 everyhwere - my vehicles are diesels.

Second, I think taxes can be more sophisticated than a simple carbon tax or gas tax. Why not tax imported oil heavily, domestic oil and natural gas somewhat less, and biodiesel and other fairly clean and renewable fuels at zero or close to zero? (on this continuum cellulosic ethanol would be taxed less than corn ethanol) Might as well make incentives to use the better sources of fuel, from both an environmental and geopolitical perspective. I think imported oil is cheap in part because its price doesn't reflect the trillions of dollars of military expenditures and "foreign aid" used to sustain them, totally apart from the environmental costs.

Posted by: Zach | August 29, 2006 at 06:28 PM

Cervus, please explain WHY the market is going to bother dealing with national energy security and global warming without any government interference or regard to externalities. I, Luger and the rest of us would really like to hear this.

Posted by: marcus | August 29, 2006 at 06:45 PM

You wrote:

“And speaking of Lugar, there is no point in pushing E85 pumps anywhere until there is E10 (“gasohol”) everywhere…”

Below is from the FULL TEXT of Senator Lugar’s speech.

“By requiring that all gasoline be E10 as ethanol supplies become available, we could accommodate significantly more ethanol production even before most flex-fuel vehicles and E85 pumps are in place. Our neighbors in Illinois have passed such legislation, and I have urged my friends in Indianapolis to follow suit.”

At first, I thought you were joining the criticisms of Senator Lugar. Now I see you are helping to spread ideas from his speech. Way to go!

Posted by: George | August 29, 2006 at 06:47 PM

Up here in Canada, if there is some sort of oil embargo, another string of hurricanes, etc, we are going to be in the same boat as you are in America. We have the same type of economy, and from what I understand ours is currently even hotter (not larger) than yours! Ontario and Alberta are booming!

I have lived in the U.S.A. for 8 years and many there do seem to think "the bigger the better." I see so many tanks driving around empty and nobody even seems to care and I'm a wacko for mentioning getting a more efficient vehicle. People used to laugh at me when I cut grass with a reel mower. ..."put away that toy..." What is the problem with people anyways?? It's cool making tossed salad without gas.

But that said, we are not a whole lot different up here. Our gas costs more, cause we have higher gas taxes. (too bad the money doesn't go to where they promised...) I remember last summer afer the hurricanes our gas peaked around $1.50 a liter. That's about $6.00 a gallon, adjust for the currency exchange, but it was way more than you guys were paying, and you still see plenty of huge tanks here too. Maybe not *quite* as many, but still lots. We are both equally FUBAR! if oil supplies dry up and our countries grind to a halt.

I wish we had more Canadian polititians hitting this topic; don't seem to be too many people at all, politicians or otherwise.

Posted by: John W. | August 29, 2006 at 06:51 PM

Dont corn and soybeans compliment each other? When I was back in wisconsin my brother said most farmers grow 2 years corn and rotate to 1 year soybeans. They have a ethanol plant in town and they are building and biodiesel plant 20 miles away. My wife's family is in the cheese business and her brother wants to start making ethanol from whey (whey premeate). There are lots of opportunity to use waste products of the food industry and convert them in to biofuels...

Jim

Posted by: jim | August 29, 2006 at 08:19 PM

Corn and soybeans are a decent compliment -- corn removes lots of minerals from the soil and soybeans do help return it. But on the whole corn is a very bad crop for soil health and the environment. As you say, though, waste products are quite promising for ethanol and other biofuel production (e.g. biodiesel from fish oil) and are much more positive.

Posted by: Zach | August 29, 2006 at 08:43 PM

Luger is a sphincter. The CAFE standard hasn't been raised in 20 years. Why? Because the Republicans have written riders into unrelated legislation to prevent NHTSA from
even studying the possibility of raising CAFE.

http://www.policyalmanac.org/environment/archive/crs_cafe_standards.shtml

Posted by: Dursun | August 29, 2006 at 08:57 PM

Marcus:

I have yet to hear an objective method of determining and imposing the costs of those externalities on energy companies or the populace at large. If you have one, I'd like to hear it. But since it will have to be imposed politically, you're going to have to convince the voters to agree to such taxation. Since even Democrats think that gas prices are too high, I doubt you'll succeed in imposing your carbon tax anyway. Therefore I think you need to find a different solution.

We are seeing a market shift already. The exponential growth in biodiesel use and production over the past few years is a great example. We have fuel algae systems almost ready for prime time through GreenFuel Tech, and Goldman Sachs invested about $27 million in the Canadian cellulosic ethanol company Iogen earlier this year. SUV and truck sales are down, hybrids are hot, and you can't find a Honda Fit anywhere.

No, the market is not perfect. Especially with the distortions our government creates with these stupid corporate welfare subsidies. I just don't want to make the system worse than it already is. But if you really want to get butanol, biodiesel, or other renewables, take some risk, and invest in them yourself. Who knows? You may get rich in the process.

And I would like to point out something that John W said above: Our gas costs more, cause we have higher gas taxes. () And it won't. Instead it'll be used to fund pork projects.

Posted by: Cervus | August 29, 2006 at 09:06 PM

Dick Lugar has been a proponent of Ethanol since at least 1999, when he and a former CIA director co-wrote a paper on the importance of oil to our national security. IIRC, that paper talked about Cellulosic Ethanol more than corn-based ethanol.

Posted by: Keith F | August 29, 2006 at 09:08 PM

Patrick: people are buying gas guzzeling SUVs because our government is still subsidizing them.

Posted by: ed | August 29, 2006 at 10:15 PM

" Calling this "coercion" is bombastic and incorrect."

All taxes are theft. Taking someones money against their will is theft. Theft is acomplished by violence or the threat of violence, coercion.

Violence and coercion are wrong. It is wrong to force people to submit to your will. It is rape. It is treating your vicims as objects to be manipulated and controled rather than treating them as human beings.

Peaceful human beings have a fundamental right to live their own lives according to their own values. If you don't like someone's values and want to change them, you can use peaceful persuasion or lead by example or,even better, mind your own business.

Violence and coercion violate the Golden Rule. Suppose someone or group does not like your values, would you like to be beaten into submission? Would you want them to confiscate your money under the threat of violence?

The choice is between war and peace. Viloence and coercion versus peaceful persuasion.

Posted by: Freedom_First | August 29, 2006 at 11:57 PM

Freedom first, some things just aren't even worth replying to. So I'll stop here.

Posted by: John W | August 30, 2006 at 05:52 AM

Corn ethanol has obvious scalability problems. Cellulosic ethanol ... well, do you think if a cheap, practical way of converting lignocellulose to motor fuel is proved, that all the countries around the world with honking big stockpiles of living trees will refrain from monetizing these assets?

Posted by: Paul Dietz | August 30, 2006 at 06:16 AM

freedom first where did you learn do read and write, in a school paid for by tax
do you drive a car on roads, paid for by tax
how dumb are you
a tax on gas which was slowly increased over time would be the best solution it would cut oil imports giving less money to the saudis
i would rather see my cash spent by the US goverment at home, than spent by the saudis on terror in iraq

Posted by: NY state of mind | August 30, 2006 at 06:41 AM

A real good politician. Let's switch our current gas guzzlers to ethanol guzzlers so my state can prosper. Nothing new here. All the corn produced in USA will not be enough to keep 200 millions ethanol guzzlers on the roads.

The problem with Americans and Canadians is not so much our addiction to Oil but our continued energy overconsumption. We consume 3+ times the industrial nations average on a per capita basis and we are not mentally prepared to do much about it.

Since neither the users nor the manufacturers will voluntarily change their behaviour, governments are more than justified to introduce measures to curb energy consumption and GHG.

A progressive $3+/gal carbon tax on fossil fuel, applied over 30+ months, would not be very popular but is required to change our behaviour. Eventually, the current ethanol subsidies will have to be replaced with alternative fuel tax to stop people from switching from gas to ethanol guzzlers.

Posted by: Harvey D. | August 30, 2006 at 07:28 AM

The problem with a large carbon tax is that it would cause carbon-intensive industries to move offshore. We'd import the products of these industries, implicitly causing CO2 to be emitted elsewhere.

To get around this, you either have to have a consistent tax across the globe, or to tax imports based on their inherent untaxed carbon intensity. I could see countries wanting to impose carbon taxes imposing prohibitive import duties on goods from countries that do not do so, or that trade freely with countries that do not do so. This would be an extreme solution, though, and probably inconsistent with existing trade agreements.

Posted by: Paul Dietz | August 30, 2006 at 08:04 AM

If you can't afford to put gas in your car (people crying on the news about choosing between gasoline and groceries) how in the hell can you afford $10,000 to $50,000 for a small recreational boat (used to new prices) considering the fuel is twice the cost of gasoline for your car, the boating industry has been in a downturn for the past few years (even the guys with disposable income are buying fewer boats both new AND used) and renting is cheaper.

You don't have to have a boat or be rich to find enjoyable recreational activities. That you believe so, Cervus, is a main fault at the core of the problem with our energy extravagance.

Not everybody has to drive the same exact miles, true. Is there really a reason to be purposely wasteful and drive 400+ miles each week? If you choose to drive so many miles you really should consider a more fuel efficient vehicle...if you don't obviously you need some incentive. During wars of the past rations were instituted for various products...with the modern "oil wars" rations should be instituted again. You do not have a right to throw away energy, you earn it through responsible behaviour. This entitlement attitude which has become pervasive in the US over the last 20 years is really detrimental. No, you don't get free medical care; you pay for it. No, you don't get to cut in line at the supermarket; you get to the back of the line. No, you don't get to drive your 3 ton vehicle at 90mph down the highway 5 inches off the bumper of the person in front of you; you get ticketed. Get your head out of your posterior and realize that you are not entitled to the world.

Posted by: Patrick | August 30, 2006 at 09:22 AM

bio diesel and ethanol are part of the solution but unless the CAFE is pushed higher its just pointless
we will prob soon see some fool runing his hummer on bio diesel, you could drive 2 or more efficient cars on the same amount of fuel
hummers and SUV in fact any car should be banned unless they can get 40mpg
if MPG of all cars sold were raised by 50 % the problems of what to fuel them on gets a little smaller
a bio diesel plug in hybrid would be sweet

Posted by: anti gravity | August 30, 2006 at 10:12 AM