As we saw in the 1970s, new energy technologies blossom when oil gets expensive. We can raise the price of fossil fuels again without hurting consumers – if we implement a fee and rebate system.
The energy crisis from 1973 to 1981 was not a happy period for Americans, but it was also a time when entrepreneurs and engineers formed a huge number of new businesses aimed at producing low-cost solar cells, high-efficiency engines for automobiles, better insulation for our houses, and so on.
I worked in the energy field then, consulting for many of these small – and large – companies. One was Sanders Associates of Nashua, N.H., with which I worked on a 100-megawatt solar turbine plant that came close to becoming reality. It was an exciting time for thousands of businesses that were close to major solutions to different aspects of the energy shortage and the extraordinarily high price of oil.
And then around 1981 the price of oil collapsed. Most of the companies working on solutions to the energy problems were either closed down or severely cut back.
Today, for environmental and national security reasons, America urgently needs innovative energy solutions that can power an economy still largely driven by fossil fuels. But so long as the price of oil remains superficially cheap, the incentive to develop the next generation of energy technologies will remain weak.
The lesson, then, is simple: If we could find a relatively painless way of increasing the price of fossil-fuel energy and the emission of pollutants, we could produce a similar surge of new businesses and reduce the unemployment rate – if there were a reasonable guarantee that the increased prices were permanent.