WASHINGTON (CN) - In a major address on energy, the Obama administration's Secretary of Energy Henry Chu argued that reducing oil consumption and greenhouse gas emissions is fundamental to the security and economy of the United States. "Decreasing carbon emissions," he said, "is simply something the world has to do."
The presentation was part of an annual energy conference by the Energy Information Administration, where the reduction of energy consumption and greenhouse gas emissions were the main issues.
To illustrate the economic consequence of oil prices, Chu displayed a chart showing that most of the recent recessions, including the current one, are preceded by a spike in gas prices.
He used the California snow pack, which the state relies on for the vast majority of its water supply, as an example of the dangers of sustained carbon emissions.
Atmospheric carbon levels are currently at 420 parts per million. In the admittedly optimistic scenario that atmospheric carbon is kept below 500 parts per million, Chu said California will lose 26 percent of its snow pack between 2020 and 2049, but the pack will continue to melt with time.
In the pessimistic prediction, the state will lose its snow pack by the end of the century.
The Secretary of Energy outlined an ambitious goal of the national administration to cut carbon emissions by 80 percent by 2050, and to get 25 percent of our energy from renewable sources by 2025.
All speakers at the DC conference, including Chu, insisted that any plan which effectively reduces greenhouse gasses will need to place a price on carbon emissions, something the Obama Administration has said it will push for.
Dependence on oil is more than just an environmental problem. "Energy is a security issue," said Chu. The oil market is globally integrated and is vulnerable to fluctuation.
Oil is bought and sold on the integrated world market. The median correlation of weekly oil prices between 1997 and 2009 for 15 different crude oil markets was 0.994, nearly identical. "Oil is virtually unique in this respect" explained William Nordhaus, a professor of economics at Yale.
The integrated world market means the United States, which now imports 60 percent of its oil, cannot buy from only secure sources, and that American dollars will inevitably go to countries like Iran.
It also means that American supply is limited by the demands of other countries, like the blooming economies of India and China. "A crisis anywhere is a crisis everywhere" said Nordhaus.
And such a crisis is inevitable said David Greene of the National Transportation Research Center. He said that between 2030 and 2050, a limited oil supply will almost certainly come up against rising demand.
This will in large part result from rising living standards in emerging countries and the resulting purchase of millions of new cars.
By 2050, Lew Fulton of the International Energy Agency expects there will be two to three billion cars in the world. "Once a country's annual income per capita reaches $5000, car ownership takes off" he said. And with almost all oil going towards transportation, such growth would drastically increase demand for oil.
At present, oil production is reaching its peak, and is expected to decline. A plateau of non-OPEC oil production is already showing itself, and OPEC is largely expected to increase production to fill this gap. But OPEC, with its growing monopoly, would likely decrease production and raise prices in order to boost revenue, said Greene.
"OPEC will not generously fill this gap," he said. "We will have to transition from petroleum to something else."
To cope, Greene said technological breakthroughs are still needed for hydrogen and electric powered cars and added that biofuels are proving less effective than once thought.
Chu also stated that renewable sources of energy need to be further researched, and President Obama has called for the doubling of investment in such research.
The American Recovery and Reinvestment Act, passed in February, allocates $28.3 billion towards improving energy efficiency at the federal and state level and towards alternate energy production.
The Department of Energy currently has three research institutions looking at biofuels. Within the first six months of research, they developed yeast and bacteria to convert simple sugars into diesel fuel and gasoline-like fuel.
In addition to research, all pointed towards improving efficiency as a large part of reducing our energy demands and lowering greenhouse gas emissions. "More than half of carbon reduction is increasing efficiency" said Lew Fulton.
But for this, government incentives are needed.
Chu used Europe as a model for instituting stable financial incentives, where such incentives are responsible for the long term renewable energy development there. John Rowe, CEO of the electrical company Exelon, also praised California for providing profit incentives for energy efficient companies.
California uses about half the electricity per person compared to the rest of the nation. Chu attributes this largely to the state's strict building codes, which he says allowed the state to maintain its per capita energy usage since 1973.
A reduction in energy use is feasible, argues Chu. He noted that increased energy consumption directly corresponds to a higher standard of living, but said this plateaus. Japan, France, Italy, Germany, Israel, and the Netherlands all have lower energy requirements per capita than the U.S., but are able to maintain a similar standard of living.
Americans can therefore make cuts in energy consumption without much sacrifice.
Chu said one big step we can take would be to improve the efficiency of our buildings. Adding electronic systems which automatically tune the heating and ventilation will improve building efficiency by 20 percent. He added that 60 to 80 percent of these changes would pay for themselves in 15 to 20 years.