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New Bottom Line Volume 10.2 – A Letter to Members of the Senate Energy Committee

Wednesday, October 10, 2001

We have had four oil shocks in three decades: the embargoes of `73 and `79, the Gulf War and now the recent attacks. Our dependence on imported oil has continued to increase. Domestic oil sources have declined and will continue to do so. This is strategically dangerous; new energy policy thinking is required.

The terrorist attacks in the US stem in large part from our dependence on Middle East oil. US troops have been stationed in Saudi Arabia since the Gulf War to guard the oil fields. Their presence in the spiritual center of Islam is blasphemy to Muslim fundamentalists.

We are now living with the pain, horror and insecurity caused by terrorism. We will be asked to give up some civil liberties, endure recession and economic hardship, sacrifice some of our finest young men and women in a war on terrorism, and probably lose even more innocent lives in the US and abroad.

Surely we can also be challenged to solve our oil dependence. By doing so, we can make the Middle East oil fields strategically unimportant, eliminate the need to station US troops in the Persian Gulf, solve the seemingly intractable environmental problems associated with climate change, and provide a new context and leadership for global sustainable development and peace-making.

It is a truism that oil is a strategic commodity, and the economy would be deeply damaged without it. While true in the short-term, it is false in the mid to long-term.

The time has arrived for new thinking and a new approach to end our dependence on oil and the Persian Gulf. The urgent challenge to US energy policy is how to reduce oil dependence as quickly as possible. Technologies to accomplish this goal now exist.

We should rapidly build new domestic energy supply systems based on hydrogen and domestic sustainable energy resources. On the demand side, we need to rapidly build a fleet of New-Generation Vehicles that get the equivalent of 50 to 100 miles per gallon when fueled with hydrogen, including SUV class vehicles. Factory production of all parts of this system can be quickly scaled up. Federal incentives can drive demand and smooth the transition.

Congress should pass a “National Energy Security, Fuel Efficiency and Hydrogen Transition Act of 2001.” It would aim to reduce oil dependence as rapidly as possible. It would also create a business boom that would stimulate the economy worldwide. Elements of the plan should include:

1. “Scrap and Trade” existing inefficient vehicles.
Subsidize with sufficiently large tax credits the early replacement and scrapping of inefficient cars and SUVs. Replacement vehicle examples include the Toyota Prius (50 mpg, 5 seats), Honda Insight (65 mpg, 2 seats) or the Hypercar™ SUV, a Ford Expedition class vehicle that gets almost 100 miles per gallon. This “Scrap and Trade” program requires the existing inefficient vehicles to be permanently taken off the road, scrapped and recycled, not resold.

2. Create a “Fee-bate” system for new car purchases.
Inefficient vehicles would be socked with large “inefficiency-penalty” fees while efficient vehicles are rewarded with a rebate. This is a self-funding revenue-neutral system that would not impose costs on the Treasury. It would send the right economic and national security signals to new car buyers and auto companies.

3. Rapidly build key infrastructure components of a hydrogen energy economy.
Create large production tax credits for hydrogen, with heaviest emphasis on production using domestic renewable energy resources like sun and wind. Provide large investment and research and development tax credits for renewable energy and fuel cell manufacturers. The Federal government may have a role to play in assuring siting for transmission lines for remote wind or solar generating systems, and for a countrywide system of new hydrogen pipelines, production and storage facilities.

4. Provide sufficient incentives for automakers and global energy companies to rapidly accelerate fuel cell vehicle and hydrogen fueling station production.
Both hydrogen infrastructure and fuel cell cars must be developed at the same time to avoid the chicken and the egg problem. Importantly for consumers, the “cents per mile” cost of driving is already equivalent between average efficiency vehicles powered by gasoline and efficient fuel cell vehicles powered by hydrogen.

5. Provide substantial funds to the World Bank and other international finance agencies that can support rapid technology transfer to third world countries.
The potential for a business boom for US companies to develop the renewable hydrogen energy economy is unprecedented. Such development funding can help build businesses.

Congress should pay for this plan with general revenues because it is a national security investment. Existing fossil fuel production incentives could also be redirected. It will be expensive, a lot like building the Interstate Highway System, space based missile defense, bailing out the S&Ls, or the Marshall Plan after World War II. But it will be immeasurably cheap compared with not doing it, and living and dying with the devastating consequences of the next oil shocks.

The security of the US and the world depends on reducing our use of oil and transitioning to a non-threatening, renewable energy system. It is time to start, we know how to do it, the technologies exist, and we should muster the will to act as quickly as is humanly possible.

Chris Robertson is a Portland, Oregon based energy consultant, and a Senior Associate of Natural Logic. He may be reached at [email protected]

(c) 2001 Gil Friend. All rights reserved.

New Bottom Line is published periodically by Natural Logic, offering decision support software and strategic consulting that help companies and communities prosper by embedding the laws of nature at the heart of enterprise.

Gil Friend, systems ecologist and business strategist, is President and CEO of Natural Logic, Inc.

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