Energy consumption is critical to economic growth and quality of life. America’s energy system, however, is malfunctioning. The status quo is characterized by a tilted playing field, where energy choices are based on the visible costs that appear on utility bills and at gas pumps. This system masks the “external” costs arising from those energy choices, including shorter lives, higher health care expenses, a changing climate, and weakened national security. As a result, we pay unnecessarily high costs for energy. New “rules of the road” could level the energy playing field. Drawing from our work for The Hamilton Project, this paper offers four principles for reforming U.S. energy policies in order to increase Americans’ well-being.
The United States was remarkably complacent about energy policy until the Arab oil embargo of 1973. Since then, we have relied on unnecessarily costly regulations and poorly designed subsidies to mandate or encourage particular forms of energy production and use.
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The innovation system has interrelated components of invention, translation, adoption, and diffusion. Energy technology innovation has lagged that in other domains, and there is a compelling public interest in picking up the pace through appropriate government action.
Historically, energy transitions have occurred gradually over the span of several decades, marked by incremental improvements in technologies. In recent years, public interest in accelerating the next energy transition has fueled a clean-energy policy agenda intended to underpin the development of a decarbonized energy economy.
The world is entering a new energy era marked by concerns over energy security, climate change, and access by the poor to modern energy services. Yet the current energy path is not compatible with sustainable development objectives. Global demand for energy will continue to grow; so will CO2 emissions. Achieving a low-carbon energy world will require an unprecedented technological transformation in the way energy is produced and used.