Cautionary Advice from California

by Paul Hawken


Date: 09/05/2001


Making sense of the California energy situation is hardly more fruitful
than trying to understand California itself.

For many citizens, the energy drama was demeaning and confusing. To use
the word "tawdry" to describe the maneuverings and pronouncements of
the larger energy suppliers might be too kind. To use the word "inept"
to describe the California governor may be equally charitable. After
securing long-term contracts for electricity at the top of the market,
California is now selling its surplus electricity at a loss.

Having been gouged the first time, Gov. Gray Davis must have looked
like a "mark" to the professional dealers, who proceeded to fleece him
a second time.

In short, the crisis had none of the virtues or vices one could like.
But, as with all crises, there are cautionary points to bear in mind:

1. Energy has always been a boom-and-bust commodity, because of the lag
between demand, supply, and investment. When prices are low, economies
are stimulated to use more, which soaks up supply, eventually causing
price increases. As supply shrinks and prices rise, it brings on new
investment in supply. Before supplies come on line, high prices
suppress demand. As demand falls and new supply becomes available,
prices plummet. The cycle repeats itself time and again.

2. Energy is the nation's most politicized commodity; politics and
markets are dreadful bedmates. Never confuse price volatility and a
free market. In fact, it is this volatility that curbs free markets.
OPEC's raison d'etre is to prevent an open market.

Even a cursory reading of the events surrounding California's blackouts
and surpluses reveals how energy supplies were manipulated, carteled,
and controlled by corporate interests with one end in mind: windfall
profits. What California endured, what the country experiences, is a
coercive market owing to the absence of energy policy.

3. American's expectation that energy be cheap and abundant greatly
reduces the opportunity for a long-term policy that would lead to less
pollution and more energy security. We are the world's spoiled children
when it comes to gas and electricity prices. We howl when we can't get
our candy. It's unbecoming, and prevents us from learning from
countries such as Germany, Switzerland, and Sweden, all of which have
considerably higher energy prices, greater energy productivity, and
better standards of living.

Although encumbered and manipulated markets are present in every
society, what is uncommon about the US (and California) is the absence
of an energy blueprint. Developed countries such as Germany, France,
and Japan have energy plans extending far into the future. Sweden has
announced policies that will make the country essentially carbon
neutral within 25 years.

The US strategy, crafted in secret at Vice President Cheney's office by
industry lobbyists, is no plan at all. It is simply a combination of
concessions and corporate welfare to the energy industries of the past.
Nothing that emerged from California resulted in a game plan that will
make the state more self-sufficient, less polluted, or more stable.
Welcome to the next crisis.

In the rush to reenergize California, there was no mention of carbon
emissions or global warming. While Democrats quickly denounced
President Bush's renunciation of the Kyoto Protocols, possible
Democratic presidential hopeful Gray Davis hasn't even discussed the

In 1979, the Energy Department said, "carbon dioxide from unrestrained
combustion of fossil fuels potentially is the most important
environmental issue facing mankind." It still is. US antipathy to
responsibility for global warming has been greeted with incredulity by
the rest of the world. Australian Sen. Bob Brown put it succinctly:
"The world's got a pretty simple choice here. It's between President
Bush and our grandchildren."

The greatest loss in California was not the billions of dollars flowing
into Texas-based energy companies. It was the loss of leadership. If
ever there was a moment to enjoin citizenry to engage in a real
dialogue about California's future, its needs, and its
responsibilities, this was the time.

A crisis, whether personal or national, is an opening, a moment when
the scattered pieces from the past can be put together in new ways that
can lead to transformation. Since California is the economic equivalent
of the fifth-largest country in the world, it would have been
appropriate for Bush to participate collegially and thoughtfully.

Despite the need to solve the power crisis, Governor Davis had the
opportunity to remind us that energy is not only a matter of price and
availability, it is also a moral issue that will indeed affect our
grandchildren and their grandchildren to come.

Paul Hawken is a businessman and author of 'The Ecology of Commerce'               
(HarperCollins, 1993) and six other books.

(c) Copyright 2001 The Christian Science Monitor. All rights reserved.