In reading John Stossel's article and Amos' post about energy independence, I remembered an email which I sent to Ltlconf about this issue. I still had it in my email account. The date was 9/28/2006. Here it is:
Some things things came to me on thinking about our discussions Saturday night.
On the issue of alternative fuels, I remembered that in a discussion with James I had proposed a role for government in this issue which I still advocate. What I said to him at that time is that government should put solar panels on its buildings. This would demonstrate to the rest of society the benefits of solar panels. Another thing that I view positively is that some school districts are now running at least some of thier buses on biodiesel. I have also heard of the military using biodiesel in tanks. I want government to do more of this sort of thing. I would be for a project whose purpose is to help government to stop using oil as much as possible.
However, outside of government, it is important for each individual and group to weigh the costs and benefits when it comes to energy usage, what fuels to use, etc. They can do this for themselves better than government can. The decisions they make together would lead to the necessary change over to alternative fuels, to the degree needed, and at the most appropriate pace. It is important for government not to interfere with this process. A Manhattan style energy project would take resources away that could be used for this purpose. It also could not address the costs and benefits on as situation specific of a level as well those in those situations.
There are some things that can be done by government to affect the incentives and disincentives in the changeover process. You told me that you believed that the Gulf War was mainly fought to affect who controlled the oil fields of Kuwait. If the U.S. had not involved itself in the conflict, and Iraq had suceeded, oil may have gone up in price. If our military is used exclusively for national defense, oil companies can not count on the U.S. to protect them from volatility in the oil market (or any other market) through foreign policy. This would have given them more of a reason to develop alternative energy sources.
Another possibility is what's called a "green tax shift". A green tax shift means moving taxation away from income and trade and onto pollution and use of natural resources. This idea is related to the Georgist single tax, or land value tax. According to the single tax theory, land should be taxed and human effort should not. Land is not created through human effort, so it should be treated differently than labor, trade, or capital. Therefore, it is the only thing that can be justifiably taxed. So, for example, a house built on someone's land should not be taxed, while the value of the land under it should. Those who advocate the green tax shift simply apply this to natural resources in general, not just land. I hate taxation, but I find this form of taxation, in the words of Milton Friedman, "the least bad tax". Taxing pollution, instead of human effort would discourage the use of oil, and provide an incentive for a change to alternative energy sources. In addition, the economic activity needed for the change over would not be taxed, which would provide another positive incentive in the process.
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