Yesterday: A Policy of Consumption

Gordon J. F. Mac Donald is the Henry R. Luce Third CenturyProfessor of Environmental Studies at Dartmouth and a memberof President Nixon's Advisory Commission on Energy. This article is adapted from a lecture given during an Alumni Seminar inMinneapolis in December. Professor Mac Donald, a geophysicist,also will be one of the principal lecturers at this summer's Dartmouth Alumni College.

Everyone has probably experienced an energy problem of one sort of another - sometimes it's personal, sometimes it's imposed from the outside. Today those problems, the brownouts and blackouts, which really resulted from failures in planning, failures in equipment, failures of a variety of kinds, are being compounded by the increasing demand for energy, and at the same time, by the increasing shortages of fuels.

To understand the current situation, it is helpful to trace some of the historical trends of how energy is used in our country and how that use has developed. An aborigine in the middle of Australia needs about 150 watts of energy to keep himself going almost entirely in the form of food. That sets the base figure, 150 watts per person, as the minimum energy requirement needed to survive. Back in 1905, in order to fuel our economy, in order to keep people moving and fed, we used, on the average, 4.5 kilowatts per person. Since then those figures for the United States have increased consistently with fluctuation associated with both world wars and the Depression. Generally, the trend has been up. In my estimate for 1973, even with a variety of conservation measures, the average per capita use of energy is 13 kilowatts. This is all forms of energy: transportation, electrical power, all ways of using resources to produce energy of one sort or another.

Another very important figure to be considered when looking at the energy problem is how many units of energy it takes to generate one dollar of the gross national product. This is a measure of efficiency of how energy gets into our economy, and it reveals some very interesting and, at the same time, some very disturbing trends. For many years it took less and less energy to generate a dollar of GNP. That meant that our economy was becoming more efficient and we were able to convert energy into goods and services at an increasingly efficient rate. Beginning around 1966, that trend turned around rather dramatically and over the past seven years it has taken more and more energy to generate that dollar of GNP. Rather than becoming more economically efficient in our energy use, we are becoming decreasingly efficient, and have been markedly so over the last seven years.

Now what about the rest of the world? How do other countries use energy? Using the same measure of kilowatts per capita, other industrialized countries - West Germany, the United Kingdom, the Soviet Union - use energy at a rate of somewhere between one-half to one-third of the United States.

The point is that back in 1905, we consumed energy on a per capita basis that is equal to or perhaps even greater than the rate at which other industrialized countries are using energy today, almost 70 years later. We have had a historical pattern of using very large quantities of energy. There has been a conscious policy developed by Democratic and Republican administrations alike to price energy as low as possible in the general belief that lowpriced energy would generate greater economic growth. So we have always used energy at a rate that is substantially larger than other countries and this pattern has continued. Part of this ofcourse, can be explained by the fact that the United States is a large country, long distances are involved. Basically, however we have had a history of using energy as intensively as possible Thecountries used in this comparison were the industrialized countries.If we look at the rest of the world, the average is about 1.8 kilowatts per capita. This is a factor of about seven less than the rate in the United States.

Now turn from these rather broad generalizations andhistorical patterns and consider how energy is used by four sectorsof our economy: first, the percentage of energy that isdirectly used for heating plants in houses and commercial establishments;second, the energy that goes into the industrial sectorof the economy; third, the energy that goes into the transportationsector of our economy; and fourth, the energy that goesinto electrical power. I will not count energy twice. I will justcount the energy that is used directly in the home by burning fueloil in the residence; 1 will not count the electricity that is used inthe home to run the washing machine - that will be under theelectrical power utilities. What is seen is that energy which goesinto the household and commercial sector has remained more or less constant. The industrial sector is using less and less energy.This is a reflection of the fact that our economy is moving awayfrom heavy industry into light industry, one oriented towardproducts and services. Transportation, in terms of total percentageof energy use, remains about constant. The very dramatic increasein the total amount and percentage of energy used is in thesector of electrical power.

Twenty-five percent of the energy that is used in this country goes into generating electricity. This has increased very rapid!} and is presently growing at such a rate that the amount of electrical energy that we will use, or the energy that goes into electricity, will double in somewhere between every eight to ten years.

Now look at how this energy is derived in each one of these sectors. The principal energy sources are burning of coal, burning of oil, and burning of gas, followed by hydroelectric power and, to a small extent, nuclear power.

In the household and residential sector the percentage of energy due to coal has dropped precipitously. Very few people heat their homes with coal any more. Petroleum has remained more or less constant in terms of percentage of source of energy that goes into the residential and commercial area of the economy. At the same time there has been an enormous increase in the use of natural gas. This shift is significant in many ways: Natural gas is becoming a less abundant commodity. The rate of discovery of natural gas fields has decreased substantially. At the same time coal is by far the most abundant fossil fuel source in this country. In the industrial sector the same pattern is taking place; industry as a whole is getting more of its energy from natural gas and less from coal.

In the transportation sector almost all the energy used to move people and move goods comes from petroleum. Petroleum is the driving, motivating fuel.

Now turn to the electrical utilities. Where do they get their energy? There is something of the same pattern; an increase in oil and natural gas, a decrease in hydro power and nuclear power. Nuclear power for this year will run between two and three per cent. Even though the capacity is around five per cent, the uptime for nuclear reactors is so low that the total fraction of the energy produced by nuclear power will still be a very small percentage of the total energy. The percentage of hydro power has dropped basically because we don't have any more rivers to dam up. There are plans to do something about the Grand Canyon, but I am sure that will lead to rather substantial battles with the environmentalists.

Where does the electricity go? There has been a small percentage increase in the residential use of electricity. This may be surprising'because we often hear about how we waste energy with electric dog nail clippers and things of that sort. In fact, the use of energy in the residential area has remained more or less constant - indeed it can be demonstrated that most of this growth is in air conditioning and electrical heating.

Much more significant is a very heavy increase in the commercial area. An ever greater percentage of electricity is flowing directly into office buildings, into parking garages, athlete stadiums and other commercial establishments. Industrial use has been decreasing, again reflecting the gradual conversion of our industrial phase of heavy industry to one that is based more on high technology and on services.

Now, what if one takes these historical figures and asks the question, "What's going to happen in the future given our current set of policies with respect to pricing, regulation, etc.?" The answer is that in the next 15 to 20 years the total energy consumption will just about double - if the sources are available. This is just an extrapolation of the past historical trend, assuming no changes in the variety of policies that influence energy usage'

The present trends indicate a much greater increase in the use of liquid petroleum. And this, of course, is one of the most worrisome elements of the current world situation - that the amount of liquid petroleum to be supplied by domestic sources is unlikely to meet these demands, even given the development, the Alaska pipeline and our resources on the outer shelf of the Atlantic coast.

It may be instructive to go back to transportation and indicate where the energy used in this sector goes. This represents a figure of billions of gallons a year and is very hard to grasp. The transportation sector today is using a little over 20 percent of the total energy in the country. If we maintain our current pattern of use and if the United States automobile "population" continues to increase at the rate of four per cent per year, the automobile alone will use up all United States petroleum reserves in about ten years. Now that's the problem. This includes an attempt to estimate Alaska and outer continental shelf sources. If we take into account the Amazon developments, Venezuela, and Canada, the time can be postponed to about 1990. The world problem is somewhat worse because the rate of automobiles in the world has increased at almost seven per cent per year; and it won't take very long to use up all the world petroleum reserves just by driving automobiles.

This is, then, a very graphic illustration of what enormous strain even one segment of our total economy, transportation, places on existing natural resources. Of course, we can extend this by using oil shale and converting coal to petroleum, but nevertheless this illustrates a point that is very necessary to understand - we cannot maintain our present transportation pattern in this country without running out of petroleum with a time scale that is small. It's not 100 years - its 10, 20, 30 years.

There are some very fundamental questions to be asked about why, historically, our use of energy has been extravagant, why it continues to be so, and what are some of the underlying reasons. Actually, this country has not had an energy policy that one could describe, other than it would appear in the nation's interest to keep energy priced as low as possible and in this way to drive an ever-increasing economy. For many years this policy worked in the sense that energy was becoming more efficiently used in generating a dollar of GNP. Things have changed.

We have kept the price of energy artificially low through a variety of policies. These were policies done piecemeal rather than by looking at the overall problem and asking where we were going. In order to increase exploration, we provided for a depletion allowance on oil, coal, and other resources; this itself brings the price that can be charged by the supplier down. We decided in 1956 to build a system of interstate highways to provide for highspeed ground transportation. The highways were funded by trust funds generated by taxes on gasoline. The highways generated more traffic, more taxes, more miles of highway, which is what one could call a positive feedback loop with some very great gains in the loop.

We have subsidized the development of nuclear energy through the Atomic Energy Commission. A very substantial amount of money went into making and developing a workable light-motor reactor and now the breeder reactor. Tax money went into that research. Where the supplier of the electricity does not have to pay for the cost of research and development it can supply the electricity at a lesser cost than otherwise possible. A very great subsidy in the nuclear industry is the so called Price-Anderson Bill, which limits the liability of utilities in the case accidents. Otherwise utilities would have a very difficult time insuring themselves against catastrophic accidents. This is the way government steps in and regulates or provides for artifically low-priced energy.

In the coal area there is a whole class of similar subsidies Last year the federal government paid $600 million to miners who suffered from the terrible black-lung disease. This is money that is coming from all the taxpayers and not from the users of the coal. No one has really questioned how government actions have distorted the price structure in the energy field.

I have not mentioned a very, very substantial cost that has been totally neglected. The utility, the industry, and even the resident has used the air and the water as a way to dispose of waste products without paying for their use. That, of course, is in the process of change through regulations - there have beer proposals for taxes or charges on materials that are admitted into the atmosphere. But in the main these costs have been borne by society as an added health cost, as an added cost in clean up, and in a variety of ways. The basic point is that the producer and the user have not payed the total price in the cost to produce that energy. We simply haven't started to probe and ask some of these long-term questions of how we can develop a system within our price mechanism that will correctly reflect the cost of energy and the variety of ways that it can be used.

There is one terribly important goal that goes back to the first number - the 13 kilowatts per capita. Anyone who analyzes this problem recognizes that we can cut that figure back without decreasing, in any way, our standard of living or quality of life. A ten per cent cut to the levels in 1970 on a per capita basis will not make a noticeable difference in how people live and how they feel about life. So the one very great goal that we should be pushing for is energy conservation. A ten per cent reduction per capita in usage of energy is a realizable goal and one that can be implemented as we work with a number of other possibilities of getting through the next few very, very difficult years.