Instead of drilling ANWR, let 'feebates' push efficiency

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No one needs reminding that 2001 has been a year not of space odysseys, but of drought, electricity shortages, rising energy prices, terrorist attacks and a war that is at least partly related to our interests in the Middle East.

It's too early yet to figure what we're learning from the above list, but two points at least are clear: First, energy policy matters; second, we need an energy policy that focuses on reducing U.S. dependence on oil. And if it's going to make a difference over the long haul, we need to focus on developing such an energy policy not during crises, but before them.

The question is how.

Among a certain set in Congress, unfortunately, the solution of the day is to drill more domestically, most notably by opening the Arctic National Wildlife Refuge to oil extraction. This option is not only foolish, but bad math. As experts have noted, the United States consumes about 25 percent of global oil but has only about 3 percent of proven global oil reserves. ANWR would provide a mere 140 days of fuel, by some estimates.

A recent report on fuel-efficiency standards further points to the folly of a purely supply-centered approach. According to the Environmental Protection Agency, the average fuel economy of new passenger vehicles in the United States is at a 20-year low. This news isn't just dismal; it's embarrassing.

Earlier this year, even conservative House Republicans were talking about conservation as a potent means of achieving energy independence. Energy bills passed by the House in summer 2001 were one-sided — most funds were slated for drilling and for big tax breaks for "clean-coal" technology — but the bills also featured small tax credits for fuel-efficient cars and for energy-efficient homes and appliances.

Personal income tax credits are a step in the right direction, but, as experts in both private and public sectors argue, they hardly begin to tap the potential to get more work out of existing energy supplies. A better way to make real gains in energy efficiency is to offer consumers far more powerful encouragement than nearly invisible tax credits: Enact federal point-of-purchase incentives known as "feebates."

A feebate, as the word suggests, is a combination of a fee and a rebate. In such a program, buyers of less-efficient vehicles or appliances would pay a fee, while buyers of more-efficient products would receive a rebate. Considered in Europe and in a number of states including Oregon, feebates are appealing because they impose no new mileage standards or emission controls, and effective because they show up in an item's price tag.

The power of feebates lies in this immediacy. By raising or lowering an item's sticker price, feebates send prospective buyers a direct cost signal — one accounting for efficiency, environmental impact and other intangible benefits such as national security — right at the cash register. Further, feebates can be completely revenue-neutral: The fees would pay for the rebates and modest administrative costs. And feebates at the federal level would dissolve the legal barriers that have hampered some state feebate efforts.

Even more, feebates promise to set off an efficiency avalanche in the opposite direction. In the case of vehicles, fees would apply to those whose mileage falls below the current industry average, while rebates would apply to cars exceeding the average. This structure would help align the price we pay for vehicles with the true cost of using them. Currently, taxpayers and citizens subsidize those who waste fuel by paying for the environmental damage, damage to human health and military costs of excessive dependence on oil.

Feebates would begin to reverse that subsidy. As customers shied away from gas guzzlers, manufacturers would gradually increase their fleets' mileage, driving up the average. Benefits would accrue quickly from the resulting drop in fossil-fuel consumption.

The EPA has estimated, for example, that increasing fuel economy by as little as three miles per gallon would reduce U.S. reliance on foreign oil by 1 million barrels each day, reduce 140 million metric tons of CO2 emissions per year and save consumers as much as $25 billion a year.

Best of all, feebates allow the market to work for environmental good while staying within industry's means. Research, including a study by the National Academy of Sciences, indicates that U.S. automakers can achieve substantial gains in fuel efficiency over the next decade or so.

Instead of pushing special-interest energy bills, the administration could show real leadership by backing feebates — one free-market tactic that, unlike tax breaks for clean coal, could push the nation toward permanent independence from oil, foreign or domestic.

Ellen W. Chu is former editorial director, and Elisa Murray is communications director, at Northwest Environment Watch, a Seattle-based research center and publisher of "This Place on Earth 2001: Guide to a Sustainable Northwest."