perfectly understandable. But perhaps the most important reason that the government today is not doing all that it should in energy R&D is that the public has been lulled into a sense of complacency by a combination of low energy prices and little sense of the connection between energy and the larger economic, environmental, and security issues that people do care very much about. In a way the low priority given to energy matters is reflected even in the Department of Energy itself, where energy is only a modest part of the Department's array of missions and there is no official responsible for all of the Department's energy activities and those alone.

What we have here is thus, in part, an education problem. There needs to be more public discussion and a growing public understanding of why energy itself and therefore energy R&D is important to the well-being of our nation and the world. In this the scientific and technological community has an obvious role to play, and we hope this report will be seen as a positive contribution to that. But the Federal government, led by the President, also has an important educational role to play, reflected in what is said and in what is done. As the last of the recommendations in this report, which was commissioned by the President, we therefore offer the following:

We believe the President should increase his efforts to communicate clearly to the
public the importance of energy and of energy R&D to the nation's future, and that
he should clearly designate the Secretary of Energy as the national leader and
coordinator for developing and carrying out a sensible national energy strategy,
which of course includes not only energy R&D but much else.

Table ES.3: Recommended DOE Applied Energy-Technology R&D Initiatives and Budget Authorityin Millions of as-spent dollars)

ES-32

CHAPTER 1

ENERGY CHALLENGES AND OPPORTUNITIES

Research and development is our Nation's investment in its own future. America's science and
technology base may well stand as our most important renewable resource. The overarching
public goal of U.S. R&D policy, of which energy R&D is a major component, must be to assure
for future generations that our Nation's capacity to shape the future through scientific research
and technological innovation is continually being renewed.

Final Report of the Task Force on Strategic Energy Research and
Development, Secretary of Energy Advisory Board, U.S. Department
of Energy, June 1995.'

Adequate, affordable energy supply and efficient energy use are indispensable ingredients of the economic well-being of individuals and nations. In the United States and worldwide, energy accounts for 7 to 8 percent of GDP and a similar share of international trade; global investments in energy-supply technology (oil refineries and pipelines, electric power plants and transmission lines, and so on) total hundreds of billions of dollars per year; and annual global expenditures on items whose energy-using characteristics are potentially important to their marketability (automobiles, aircraft, buildings, appliances, industrial machinery, and more) run into the trillions. When and where energy becomes scarce or expensive, recession, inflation, unemployment, and the frustration of aspirations for economic betterment are the usual results.

Energy is no less crucial to the environmental dimensions of human well-being than to the economic ones. It accounts for a striking share of the most troublesome environmental problems at every geographic scale-from wood smoke in Third World village huts, to regional smogs and acid precipitation, to the risk of widespread radioactive contamination from accidents at nuclear-energy facilities, to the buildup of carbon dioxide and other greenhouse gases (GHG) in the global atmosphere. The growth of energy use, driven by the combination of population increase and economic development, has pushed some of these problems to levels variously disruptive of human health, property, economic output, food production, peace of mind, and enjoyment of nature in many regions. And all of these aspects of human well-being could eventually be impacted over substantial areas of the planet by the kinds of global climatic changes widely predicted to result from continued buildup in the atmosphere of GHGs, most importantly carbon dioxide from fossil fuel combustion.

1 SEAB (1995). This is the first paragraph of the final report of the Task Force. We agree wholeheartedly with this view-and with much else in that report—and we hope readers of our study will read that one, too.

The importance of energy to national economies and the circumstance that more than a quarter of total world energy supply (including more than half of the oil) is traded internationally make energy a national security issue as well as an economic and environmental one. Gaining or protecting access to foreign energy resources has been a contributing motivation in a number of major conflicts during the twentieth century and could be again in the twenty-first. Another national security dimension of energy is the danger that nuclear-weapons-relevant knowledge and materials will be transferred from civilian nuclear energy programs into national nuclear arsenals or terrorist bombs. Still another is the potential for largescale failures of energy strategy with economic or environmental consequences serious enough to generate or aggravate social and political instability (this a concern not only in developing countries but also in industrialized ones that fall on hard times).

Improvements in energy technology and the widespread penetration of these improvements in the marketplace in the twenty-first century are badly needed to enhance the positive connections between energy and economic well-being and to ameliorate the negative connections between energy and environment and between energy and international security. Such improvements in technology can lower the monetary and environmental costs of supplying energy, lower its effective costs by increasing the efficiency of its end uses, reduce overdependence on oil imports, slow the buildup of heat-trapping gases in the atmosphere, and enhance the prospects for environmentally sustainable and politically stabilizing economic development in the many of the world's potential trouble spots.

Research and development (R&D) is the only systematic means for creating the needed technical improvements and, therefore, is a necessary (although not always sufficient) condition for improving the energy systems that are actually deployed. What is deployable today is the result of the energy R&D that was done in the past; what will be deployable in the future depends on the R&D that is being done now and that will be done tomorrow. It is important to understand, moreover, that while some kinds of energy R&D can bring quite rapid returns (such as research on finding oil and gas, or on improving the efficiency of electric lightbulbs), the time scales on which most kinds of energy R&D exert a significant influence on deployed energy systems are longer. This is related not only to the time required to complete the R&D but also to the long turnover times of most energy-supply and energy-end-use equipment: on the supply side, for example, three to five decades for electric power plants and oil refineries; on the end-use side, five decades or more for residential and commercial buildings, and a decade or more even for automobiles and household appliances.

These long time scales are one of the reasons that energy R&D is not and should not be left entirely to the private sector, even in a free-enterprise-based economic system such as that of the United States: It is in society's interest to investigate-as part of its strategy for preparing for an uncertain future-some high-potential-payoff energy alternatives for which the combination of a long time horizon for potential economic returns, uncertainty of success, and cost of the R&D makes this pursuit unattractive to private firms. Another rationale for a government role in R&D is that some of the most badly needed improvements in energy technologies relate to "externalities" (such as environmental impacts) and “public goods" (such as national security) that are not valued in the marketplace and hence do not generate the market signals to which firms respond. Still another is that the fruits of some kinds of R&D are difficult for any one firm or small group of firms to appropriate, even though these innovations may be highly beneficial to society as a whole. Finally, the structure of particular energy industries and markets may mask or dilute incentives for firms to conduct R&D from which they, their customers, and society as a whole would all greatly benefit.