It’s laudabale that President Bush, in his State of the Union address, reversed his earlier opposition to a variety of energy and environmental initiatives. Fuel cells, hyrdogen economy and energy independence? Yes indeed.
But it’s too little, it’s too modest, and more importantly, it’s off track. (And much of it little more than a cosmetic cover for programs — like Cleaner Skies and his forestry initiatives — that likely move environmental and economic quality in the wrong direwction.
But let’s focus for the moment on energy. A leader with a real commitment to smaller government would not give public funds to private industry, would not tell industry what to do or how to do it.
Rather (he or she) would set clear, aggressive public targets (whether binding or voluntary), and let private industry race to innovate to meet and exceed those targets. For example, make CAFE the performance floor and zero emissions the next target.
If public funds are to be spent to enhance the process, they should be spent market incentives that reward those who meet the goals.
But the most effective application of public leverage will not be to spend money on rewards, but to remove public subsidy of the perverse incentives that riddle the system, bias the market and warp spending and investment decisions.
If people had to pay the real price of gasoline at the pump — about 6x current prices, according to Amory Lovins’s estimate — the automakers would get innovative in one quick hurry.


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