Strategic cost-benefit analysis of energy policies: comparative analysis

Abstract

Current US energy policy includes many programs directed toward restructuring the energy system in order to decrease US dependence on foreign supplies and to increase our reliance on plentiful and environmentally benign energy flow. 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. In the first strategy no additional programs or policies are initiated beyond those currently in effect or announced. The second is directed toward reducing the growth in energy demand, i.e., energy conservation. The third promotes increased domestic 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 results indicate 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, involves substantial environmental costs, and slows the rate of economic growth. These relationships could be different if the energy savings per unit cost for conservation are less than anticipated, or if the costs of synthetic fuels can be significantly lowered. Given these uncertainties, both conservation and RD and D support for synfuels should be included in future energy policy. However, between these policy alternatives, conservation appears to be the preferred strategy. The results of this study are presented in three reports: The Overview; The Detailed Projections; and The Comparative Analysis.