July 22, 2007
National Security and Energy Policy
Do National Security and Environmental Energy Policies Conflict? Becker
Individuals and groups support government regulation of energy use either because they are concerned about the negative effects of oil, gas, and other fossil fuels on the environment, or about the impact of demand for these fuels on national security. Prospects for political consensus on energy policies are dim for the many approaches that further one of these causes at the expense of the other.
Environmental-driven energy policies try to reduce pollution from cars, the generation of electric power, and other industrial and household activities. An obvious example is the current efforts to reduce CO2 emissions from the use of fossil fuels, especially oil and coal. National security energy policies may try to reduce the vulnerability of energy sources to hostile acts, such as interference with oil or gas imports, or to disruptions at the source, such as with Middle Eastern oil supplies, or the supply of natural gas from Russia. National security also depends on how much revenue is received by oil and gas producing countries that may support terrorism, or are vulnerable to potential takeover by terrorist organizations.
Many ways to make the supply of energy sources more reliable in order to promote national security conflict with the goal of reducing pollution from the use of energy in the economy. For example, China and the United States have abundant supplies of coal, and their further development and use would make the energy used by both countries less dependent on foreign supply. However, coal fired power plants emit large amounts of CO2 that are thought by many to be an important contributor to global warming. The burning of coal also contributes significantly to local pollution, mainly through the emission of sulphur dioxide gases. These local emissions can be greatly reduced through known technologies that involve installing expensive scrubbers that may not be used by poorer countries.
Some security specialists advocate that the United States shift more of its demand for oil and natural gas to friendly sources in the Western Hemisphere, such as Canada and Mexico, in order to reduce the vulnerability of its energy imports to hostile acts. Such a shift, however, would not improve the environmental impact of America's use of oil and gas, nor would it do anything to reduce the revenue from the sale of oil and gas by Middle Eastern and other potentially unfriendly states. For the world price of these fuels should not be affected by much, if at all, by shifts of U.S. demand to nearby friendly nations. Countries that would have bought oil and gas from say Canada and Mexico would now have to buy more of these fuels from Middle Eastern or other potentially unfriendly producers to make up for the shortfalls in available supply from these countries.
Fortunately, various governmental policies contribute to both environmental and national security goals. A tax on carbon emissions from business and household production would not only help reduce global warming-by how much is still controversial- but it would also lower the world prices of these fuels through reducing the demand for fossil fuels. Lower prices would cut the revenues received by Middle Eastern states from the sale of oil and natural gas. This is why a carbon tax receives support from many environmentalists and national security advocates.
Nuclear power also gets high marks on national security grounds (although as we will see, not necessarily on international security grounds) as well as on many environmental issues. Nuclear power is clean and does not emit CO2, SO2, or other gases that contribute to global or local pollution. Accidents and natural events that release radioactive materials from nuclear power plants are a risk, such as in the recent earthquake in Nigata prefecture in Northwestern Japan that caused a leak of apparently low level radiation from a nuclear power plant located there. But serious accidents have been very rare because so many precautions are taken in state of the art plants-the worse accident occurred at Cherynobyl in a plant that had minimal and primitive safety measures. Although safety is not much of an issue in nuclear power plants in economically advanced countries, it may well be for some of the many plants currently under construction in China and India.
The disposal of nuclear waste, either through reuse, or burial deeply in former mines or far under oceans, may also present major environmental challenges. Clearly, reuse of much of the waste is feasible-France, a major producer of nuclear power, reuses most of its waste. My conclusion from reading some of the literature on disposal is that safe burial is also feasible, especially for large countries like the United States and China, but that view is not universally accepted.
Nuclear power has many advantages on national security grounds. The supply of uranium, unlike oil, is widespread and abundant, and there is little risk that any single or small number of uranium producing countries can blackmail other countries by withholding supplies. The international security issues from nuclear power relate to countries that as yet do not have arsenals of nuclear weapons. If these countries develop nuclear power they will automatically generate the plutonium necessary to construct nuclear bombs. If some of that plutonium fell into the hands of rogue states or terrorist groups, the risk of possibly millions of deaths from nuclear attacks becomes scary.
Driven by environmental and security concerns, more extensive government intervention in the supply and demand for energy are to be expected during the next few years in all economically important countries. Policies that meet both these concerns are feasible, and clearly would have greater political support than the many approaches that advance one of these goals at the expense of the other.
Environment and National Security--Posner's Comment
I agree with Becker's excellent piece and have little to add. He is certainly correct that the political saleability of a carbon tax aimed at reducing carbon dioxide emissions that contribute significantly to global warming would be greatly enhanced by emphasizing the national-security benefits. That way both environmentalists, who tend to be liberals, and national-security hawks, who are almost always conservatives, might be induced to join in supporting such a tax.
It is an important detail to note that a carbon tax and a tax on gasoline or other fuels are not identical. A tax on gasoline would have a direct effect in reducing demand for oil, thus reducing, as Becker points out, the oil revenues of oil-producing nations. The tax would reduce demand, and since oil is produced with the usual upward-sloping supply curve, the price of oil is equal to the supply cost of the marginal output and thus generates enormous revenues for low-cost producers. But a gasoline tax would be inferior to a carbon tax from the standpoint of limiting global warming, because producers of oil, refiners of gasoline, and producers of cars and other products that burn fossil fuels would have no incentive to adopt processes that would reduce the amount of carbon dioxide emissions per barrel of oil, gallon of gasoline, etc. A carbon tax would create such an incentive and would also have a strong indirect negative effect on the demand for fossil fuels.
I would put greater weight on the environmental issue than on the national-security benefits of reduced demand for oil. I would thus be disinclined to encourage the substitution of coal for oil, as that would do nothing to reduce carbon-dioxide emissions though it would reduce our dependence on oil. If as I believe our greatest national-security threat is from terrorism, the benefits of reducing the world's demand for oil would be modest. The expense of terrorist attacks is small relative to the aggregate resources of countries that finance or permit their citizens to finance terrorism, and would still be small relative to those resources after the wealth of some of those countries declined somewhat as a result of a reduced worldwide demand for oil.
A separate concern is worldwide (and hence our) dependence on unstable sources of oil in countries like Venezuela, Iraq, Nigeria, Iran, and potentially Saudi Arabia. Coupled with growing demand for oil by China, India, and other developing countries, an uncertain supply could cause the price of oil to spike. That would not be altogether a bad thing because it would limit demand and thus reduce carbon dioxide emissions. Moreover, the spike would be a politically appealing occasion for the imposition of a stiff carbon tax that would reduce the revenues of the producing countries and (to the extent the tax did not reduce demand in the United States) transfer some of those revenues to the U.S. Treasury. The tax might not increase the price of oil to consumers significantly, because laid on top of the price spike it might so reduce the demand for oil that the cost of production fell steeply, assuming an inelastic supply.
A point Becker does not touch on is the importance of international cooperation to deal with environmental problems. Although the United States is about a quarter of the world's economy, even a 10 percent decline (at present unforeseeable) in our carbon-dioxide emissions and our burning of fossil fuels would have only a modest effect on global warming and on the overall demand for oil. Indeed the entire effect might be offset by soaring demand (and concomitant increases in carbon dioxide emissions) by China and other developing countries. There are very serious free-rider problems involved in reining in the use of fossil fuels by developing countries. Yet in other areas of global conflict, such as intellectual property (consuming countries in the developing world do not want to pay royalties to the producers of intellectual property), it has proved possible to overcome free-rider problems to a considerable extent through aggressive efforts to achieve international cooperation. The Administration seems not to have exerted such efforts with respect to environmental matters, and in national security too has generally preferred to go it alone.
The limits of unilateralism were underscored in an article in the* Wall Street Journal* on July 20 explaining how smog in San Francisco and Los Angeles is being exacerbated by enormous plumes of polluted air ("rivers of polluted air," the author called them) blown eastward over the Pacific Ocean from China. Of course we cannot order China to stop polluting. But there is much that China wants from us that we should be able to give the Chinese at relatively low cost in exchange for better environmental controls. One would like to see the Administration more active in this area, but one of the casualties of the war in Iraq is distraction from other urgent global problems.