- THE ENERGY REPORT
- Executive Summary
Texas has the resources it needs to meet its energy demands for the foreseeable future, though tomorrow’s fuel mix may be quite different than today’s. The days of near-total reliance on cheap and abundant fossil fuels may be decreasing. Instead, we will rely on a mix of fuels and improved efficiency.
Still, it is important to remember that traditional fossil fuels will remain our primary sources of energy for many years. Gasoline and diesel will continue to provide the vast majority of our transportation fuel. Natural gas and coal will not be displaced anytime soon as our primary sources of electricity. In fact, worldwide demand for fossil fuels is accelerating, and China in particular is investing hugely in fossil fuels, opening coal-fired power plants at an average rate of one per week.285
This demand, however – and the shrinking reserves being tapped to meet it – make it vitally important that we learn how to use these fuels in a more efficient manner.
Any source of energy has its benefits and problems. The fuels we have relied on for decades generally are still the least expensive for most uses. But they can carry costs that are not necessarily reflected in the prices consumers pay. The costs of pollution, for instance, may be borne by all.
U.S. policymakers, however, are increasingly likely to quantify and impose some of these costs on producers and consumers. In particular, greenhouse gas emissions seem likely to be restricted in some manner.
The expectation of such policies, along with rising fuel prices, has directed a great deal of attention toward renewable energy sources and nuclear power. Investment in the technologies needed to tap these resources is rising rapidly, driven in part by government subsidies.
Policymakers face a number of difficult decisions regarding energy policy in the coming years. And just as choices made by energy producers and individual consumers carry costs and benefits, so do choices made by governments. Furthermore, as much as decisions made by private businesses can have spillover effects whose costs are paid by society, government policies intended to encourage the development of a chosen resource can have unintended consequences.
For example, federal law subsidizes the use of ethanol and now requires that a portion of the U.S. transportation fuel supply come from ethanol and other biofuels. Critics have noted that the rapid rise in demand for corn has driven corn prices higher and has encouraged farmers to replace existing crops with corn, which has contributed to increasing prices for a wide array of other food products.286
The unintended consequences of new government action can be made worse by establishing policies that favor given resources – “picking winners” – instead of setting policy goals and establishing broad guidelines that will allow the market to meet those goals in the most efficient means possible, regardless of the fuel source or technology employed.
Government has played a large role in the development of both fossil fuels and alternative energy sources. The development of wind energy, biofuels and nuclear power has been assisted by the application of government subsidies to make new energy technology affordable. Yet such assistance must be applied carefully. Public policies that attempt to pick winners in the race for new energy technologies are an inefficient way to achieve policy goals, and run the risk not only of wasting taxpayer money, but also of directing private investment away from more promising uses.
Fortunately, Texas is in a position to lead on national energy policy, due to its unique experience in conventional energy technology, its vibrant research community and its vast reserves of energy resources. Breakthroughs made in Texas can have an enormous economic impact on the state – and the world.