The Arizona Republic - January 21, 2007  

 

North America needs an energy alliance
3-nation strategy would balance needs, ecology

By Joel Kotkin and Robert Hertzberg

 

n the opening decades of the 21st century, virtually all of America's most critical problems — political, environmental and economic — will be wrapped up within the issue of energy. Energy fuels our deadliest enemies, threatens our environment, and poses a direct challenge to our long-term economic viability.

What is needed now is a coherent strategy that deals directly with our fundamental geopolitical dilemma: how to grow our economy while reducing our dependence on imported energy and, over time, carbon-emitting fuels.

We believe there is such a workable strategy. It centers on the creation of a powerful energy alliance among the three great nations of North America: the United States, Canada and Mexico.

Our proposal

We envision the formation of a North American Energy Community (NAEC). It seeks to establish common energy policies among three countries that share the fairest stretch of the globe. Each of these nations has enormous technical capacity and great potential energy resources; our economies, ecosystems and populations are increasingly intertwined.

This commonality, intensified by highways, waterways and air corridors that connect the three nations, should lead us to develop a common energy policy that can meet our long-term and short-term energy challenges. Our basic premise starts with the notion that, for the short term at least, we need to develop domestic fossil fuels. This step, however, needs to be taken with the strongest possible environmental safeguards.

At the same time, we can also take steps to quicken the development of renewables, energy from sources that can't be depleted. By employing incentives and private venture capital, we can enable these resources to shoulder a larger share of our energy burden as quickly as is feasible. Rather than simply focus on one tactic, we can, with multiple approaches, promote a North American space that is simultaneously safe, green and prosperous.

The NAEC offers an alternative to the current situation. In today's landscape, we lack an apparent overarching strategy to deal with energy. Our energy policies tend to be dysfunctional and unfocused, shaped often without coherence by Congress, the executive branch and the courts and influenced by fossil-fuel producers, by specific renewable-energy lobbies and by environmental groups. The work of these varied interests often slows efforts to create new energy geopolitics.

As a recent Council of Foreign Relations report concluded, "Virtually everything concerning energy has changed - except U.S. policy."

If we continue on this haphazard course, our dependence on foreign petroleum imports is likely to grow, with potentially catastrophic results. Current estimates are that we will increase oil imports from 12.6 million barrels a day today to 16.4 million in 2030. More than half of that is expected to come from OPEC suppliers, with much of the rest from Russia and the Central Asian autocracies.

Proven reserves

The NAEC represents a direct counterpoint to such a result. Taken together, the resources of our three countries are both immense and extraordinarily diverse. Overall, North America ranks second only to the Middle East in proven oil reserves. Canada, for example, ranks second in proven crude-oil reserves, outpaced only by Saudi Arabia; the United States ranks 11th and Mexico 14th. The three North American states rank in the top 15 in natural-gas production, as well.

So, in the short term, particularly with sensible conservation and environmental mitigation, North America should be able to increase production and reduce dependence on other continents. In the long term, all three nations have ample resources that allow each to shift over time toward a growing dependence on clean, renewable sources.

Canada is known for its surplus of fossil fuels, but it also possesses promising potential in hydroelectric and wind energy. Its considerable wind potential, Canadian researchers believe, could provide 20 percent of that nation's power. Prince Edward Island, on the country's eastern coast, is already conducting a major experiment to shift its primary energy dependence toward wind and biomass.

Mexico, long an oil exporter, needs new technology both to upgrade its energy industry and to exploit its potential in renewable fuels. Over time, experts say, Mexican production of fossil fuels will drop, but the nation has an almost totally unexploited potential in solar and ethanol fuel. Corn production was pioneered there, and Mexico also could follow the Brazilian model, exploiting the energy potential of sugar that can be grown in quantities in its southern tropics.

For its part, the United States has some of the world's richest carbon energy resources. U.S. oil production is likely to increase between now and 2017 and then fall off. Our nation also has the world's largest coal reserves.

But over the long term, particularly if new, clean fossil fuel technologies are not developed quickly, we will have to depend increasingly on solar, wind and biofuels, of which we are already the world's second-largest producer.

By pooling our resources and investing together in our common future, the North American community can free itself in reasonable time from dependence on unscrupulous energy suppliers such as Venezuela, Saudi Arabia, Russia and Iran, all nations that reject fundamental democratic values. The North American Energy Community could also provide a political bulwark for us and a strong basis for an alliance with energy-deficient democracies such as Japan, South Korea and the European Community, which also is developing its own energy strategy.

By providing incentives for investment in our three nations, we strengthen each other. Money spent on development and importation of energy from Russia, Saudi Arabia or Iran has relatively few benefits for our economy. We conduct pathetically little export trade with these nations; we constitute less than 5 percent of Russia's imports, 13 percent of Saudi Arabia's, and virtually none of Iran's.

Europe, Japan and, increasingly, China — not the United States — are the growing and primary beneficiaries of the energy producers' wealth.

The same dollars spent within North America have a very different effect. Canada and Mexico together constitute by far the largest export market for the United States. Over 35 percent of our exports now go to our North American allies, compared with less than 5 percent to OPEC and less than 1 percent to the Russian Federation.

Wealthier Mexico

Investment in Mexico's Peninsula de Atasta, an ethanol plant in Iowa or a hydroelectric plant in Quebec enriches customers for whom the United States is a primary source of both manufactured goods and services, including tourism.

A wealthier Mexico also means more visitors to the parks of Orlando and Anaheim, the golf resorts of Phoenix or to shop at Houston's Galleria. Canadians, for their part, flock first to New York, Arizona, California or Florida when they have extra change to spend.

The ancillary effects, the impact on our societies, of secure energy production cannot be underestimated. Today, we are witnessing a massive shift of manufacturing to regions outside North America that increasingly secure their energy in the dirtiest forms possible, often from some of our nation's most resolute opponents. This explosion in production does not much benefit America's industries; instead, China's major non-commodity imports come from nearby Japan, South Korea and Taiwan.

Far better for the United States and Canada if a new energy boom were to supercharge the Mexican economy. A Mexico that creates jobs and funds education, roads and other basic infrastructure investments represents a twofold boon. It generates new markets for American businesses, and it undermines the root causes of why so many Mexicans seek a better future in the United States and, increasingly, in Canada.

European model

Our proposal for an energy community does not necessarily seek to follow the model of the North American Free Trade Agreement, which essentially sought to lower trade barriers without any defined economic or strategic benefit. Instead, our model is based on the successful post-World War II European Coal and Steel Community, founded in 1951 to promote greater continental competitiveness against North America and other regions.

This remarkable agency used cooperative agreements among member countries to spark intracontinental growth, including an impressive 75 percent increase in iron and steel production during its first decade. The community also played a strong role in raising the quality of Europe's manufacturers by improving working conditions and environmental standards.

Like the European Coal and Steel Community, the North American Energy Community is based on a frank realization that our continent needs to pool its resources to compete with other powers. This means, for example, massive new investment in pipelines and transmission lines both within and among our countries.

The NAEC is not envisioned to be a state-dominated mechanism. It primarily will seek to tap private capital through incentives for clean, continental energy development, although intergovernmental cooperation, particularly in research and development, may play an important role. Our goal is not to rely on an extensive bureaucracy and heavily regulated system that is often characteristic of the European Union. Instead, we believe the key roles should be played by the competitors within the marketplace, inspired by competition among companies and technologies that can deliver clean, efficient energy.

Unlike NAFTA, the NAEC constitutes a fundamental geopolitical alliance based on the realization that even the world's remaining superpower cannot go it alone. It aims primarily to provide a defensive barrier against dependence on autocracies from the Old World.

Some will object to our continental focus, suggesting that we instead depend on the free market to work out our energy dilemmas. Yet this approach presumes, incorrectly, that energy development is in the hands of something resembling a free market. This may have been true once, but today, the vast majority of energy reserves, upward of 77 percent, are held by government-owned firms whose first mission is to protect their own economies and security concerns.

Some of these firms, notably in Russia and Iran, use their energy supplies to apply political pressure on neighboring countries and to garner greater influence around the world. For example, the Shanghai Cooperation Organization, founded in 2001, seeks to create an alliance between authoritarian and energy-deficient China and its former Communist ally and parallel autocracy, oil-exporter Russia. The possible involvement of other anti-Western countries, including Iran, is growing.

A catalyst

In light of such challenges, the NAEC draws on the notion that the best defense against such alliances lies in making ourselves invulnerable to the political pressure of these energy-producing states. It would also provide us with leverage to forge further links with our natural allies among democratic, energy-consuming nations within the European Union, and with Japan, South Korea and perhaps India, as well.

Finally, the NAEC can become a catalyst toward f a clean energy environment for all of North America. The range of possibilities spans from joint research and development to conservation and renewable-energy measures, and it includes the potential for "clean coal" and other improved fossil output. The goal, laid out in a series of incentives, should be first to achieve energy independence and second to dramatically cut greenhouse gases and pollution.

These goals should be focused, as was the case with the European Coal and Steel Community, on fostering competition within North America among various energy sectors. Our goals should be clear, but our path needs to be market-based and our tactics flexible.

Ultimately, the NAEC is about the future for all of North Americans and their children. After all, whatever side of the Rio Grande or the St. Lawrence we inhabit, we are all inheritors of a common environment, sharing a legacy of indigenous peoples and of pioneer generations.

There is no denying that these proposals are radical and will be subject to opposition by narrow, well-organized pressure groups. But this should not deter us. By uniting our vast resources in a single North American alliance, we can provide a tremendous boost not only to our own prospects but to the future economic, environmental and political health of the rest of the world, as well.

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Joel Kotkin is an Irvine Senior Fellow with the New America Foundation and author of "The City: A Global History." Robert Hertzberg was speaker of the California state Assembly from 2000 to 2002.

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