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WAKE UP AND SMELL THE EXHAUST PIPE

WE CAN SOLVE THIS ENERGY MESS

In this third and final extract from their new book, "Zoom", Iain Carson and Vijay Vaitheeswaran of The Economist propose five principles for a fairer energy policy and a cleaner world ...

Special to MORE INTELLIGENT LIFE

The most sensible way to a clean energy future is to unrig the game. Americans should start by naming and shaming the companies that benefit from subsidies, expose the amount of giveaways, and shine a fiery spotlight on the politicians who steal from ordinary taxpayers to keep the lobbyists happy.

There is an opening for leaders with vision--but they desperately need support. They aren't getting it from most mainstream environmental groups in America, who have demonstrated unpardonable cowardice when it comes to advocating "eco-taxation". Two decades of success in Europe shows that economies can flourish while improving the environment by shifting taxes away from "good" things government wants to encourage, like labour or social security, and on to "bad" things like carbon pollution or chemical waste.

If a leader wanted to sell a tax more easily in America he or she could adopt the idea of a "Patriot Tax Refund", which would make any gasoline tax "revenue neutral" by handing back refund checks to every household. Households that drove three Hummers would still be left paying more for gasoline with the new tax, than ones that drove Priuses or rode bicycles.

That proposal should be at the top of the short-list of smart energy policies that the next American president and Congress should put in place. Here are five first principles that such a 21st-century energy policy should follow:

1 Americans need to pay honest prices for fossil fuels. The cost of gasoline must reflect the true cost to society imposed by its environmental, geopolitical and economic harm. The best way to accomplish this is through revenue-neutral taxation and the elimination of subsidies, which would level the energy playing field so that clean alternatives finally have a fighting chance.

2 The business of business is business. Don't expect corporations to act out of goodwill, charity or "corporate social responsibility" to tackle oil addiction. There is nothing immoral or surprising about oil companies' selling oil, or car companies' selling SUVs, and voluntary schemes and claims of being "beyond petroleum" should be discounted. If Americans want companies to move beyond oil, they must change the social contract through government action.

3 Leave it to the market to pick the winners. The temptation is strong to look to the government to back promising technologies. However, history shows that this is a formula for disaster. No group of officials, no matter how benevolent or well funded, can match the dynamism of markets and entrepreneurs in coming up with innovative technologies and business models that best meet consumers' needs.

4 Government must act. While bureaucrats should not push favoured technologies, the conventional laissez-faire argument for government to do nothing falls short. There is a clear case for government intervention in energy and environmental policy due to the costly externalities involved in burning fossil fuels. In addition to externalities pricing, there is a strong case for specific regulations (such as a market-minded substitute for CAFE fuel-economy standards) and especially for investment in the much-neglected areas of technical education and basic energy research.

5 Individual action is the essential catalyst for change. The key to driving change in America's political system is grassroots rebellion. As individuals and communities come together as part of this Great Awakening to demand better from the country's leaders, political leaders of vision will at last have the chance to step forward and answer their call.