27 April 2005

Come again?

Under pressure over high energy prices, President Bush on Wednesday will propose tackling the root causes of the problem by encouraging new oil refineries be built... link

And here I was thinking that high demand and uncertain supplies were the root cause of high energy prices.

They're also proposing tax credits for diesel, hybrid, and fuel cell vehicles. All other things being equal, promoting diesel seems like a good idea, But hybrids, although they help with pollution in cities, don't help overall, since the electricity to run them must be generated somehow, typically by burning fossil fuels.

Luckily - and I suspect this is really the point of all this - they're also proposing that insurance be offered to nuclear power companies to offset the cost of regulatory delay. If I'm reading that right, that means that if a company builds a shoddy nuclear plant, and their operating license gets delayed, we'll pay the company for its incompetence, as opposed to penalizing them. Somehow, I think this will create perverse incentives for the nuclear power industry.

In the end, though, given limited supplies, the only economically sound way of managing energy prices is to control demand. I'm with The Economist - a tax on the amount of carbon emitted into the atmosphere is the right way to go. For electric vehicles, this would be levied on the electricity provider, who would then pass it on to their customers. The main virtue of this tax would be that those heaviest hit by it would be those who pollute the most.

Update: I just realized that yesterday was the anniversary of Chernobyl. The brazenness just takes your breath away, doesn't it?