Economic assessment of alternative energy policies

Current US energy policy includes many programs directed toward the restructuring of the energy system so as to decrease US dependence on foreign supplies and to increase our reliance on plentiful and environmentally benign energy forms. However, recent events have led to renewed concern over the direction of current energy policy. This study describes three possible energy strategies and analyzes each in terms of its economic, environmental, and national security benefits and costs. Each strategy is represented by a specific policy. The first strategy is to initiate no additional programs or policies beyond those currently in effect or announced. The second is to direct policy toward reducing the growth in energy demand, i.e., energy conservation. The third is to promote increased supply through accelerated development of synthetic and unconventional fuels. The analysis focuses on the evaluation and comparison of these strategy alternatives with respect to their energy, economic, and environmental consequences. The analysis indicates that conservation can substantially reduce import dependence and slow the growth of energy demand, with only a small macroeconomic cost and with substantial environmental benefits; the synfuels policy reduces imports by a smaller amount, does not reduce the growth in energy demand, and involves substantial environmental costs and impacts on economic performance. However, these relationships could be different if the energy savings per unit cost for conservation turned out to be less than anticipated; therefore, both conservation and R, D, and D support for synfuels should be included in future energy policy.