As the Senate prepares to debate a climate and energy measure, what impact would the legislation have on the United States' energy security? During today's OnPoint, Karen Harbert, president and CEO of the Institute for 21st Century Energy at the U.S. Chamber of Commerce, discusses the chamber's new Index of Energy Security Risk, which helps to quantify the impact of policy measures on the nation's energy security.
Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. Joining me today is Karen Harbert, president and CEO of the U.S. Chamber of Commerce Institute for 21st Century Energy. Karen, it's great to see you.
Karen Harbert: Oh, delighted to be here, thanks Monica.
Monica Trauzzi: Karen, the chamber is releasing an index of energy security risks today. It's a tool that will help lawmakers assess the nation's energy security level and also quantify the impact of certain policy measures on our energy security. Why was this so necessary? I mean up until this point, how have we been assessing what our energy security level is?
Karen Harbert: Well, that's the right question and we asked ourselves that question and we surveyed the literature and all the things that were out there. There wasn't one single measurement, so we undertook a year-long effort to try and quantify what our risks are to energy security. And this takes a 40-year look back, all the way back to 1970 and then looks out to 2030. So, we can isolate events that happened in our past and predict what happens in the future.
Monica Trauzzi: So, how secure are we right now?
Karen Harbert: Well, we're not where we need to be, that's the bottom line. There are lots of things that we could be doing from a geopolitical nature, from an economic nature, affordability, reliability that would increase our energy security and decrease our risk, because that's really what we're measuring is risk and we certainly have a lot of exposure and vulnerability right now.
Monica Trauzzi: OK, so what should we be doing right now?
Karen Harbert: Well, it really shows us that we need a more diverse set of sources of energy. We need to be investing in our infrastructure. The reliability part of our energy infrastructure is in question and we're not building and investing in the way that we need to. And we certainly haven't brought online the type of energy we're going to need to fuel our economic recovery. And you can see that in two and three and five years out, that unless we change things now we're not going to have the energy we need tomorrow.
Monica Trauzzi: And, like you said, this index perspectively looks forward through 2030. How do things look over the next couple of decades?
Karen Harbert: Well, our risks are growing, they're not decreasing and that should be instructive and this is intended to be instructive to policy makers, saying here's what the landscape looks like, here's the tool to go back and look at how we could change things. What policies could we put in place, what regulations could we enact or not enact? What penalties, what taxes, those types of things that will change our future. Hopefully, they'll use it as a tool to be able to gauge the impact of their policy decisions.
Monica Trauzzi: Does the index come along also with a formal definition of energy security? I mean how would you define energy security?
Karen Harbert: Well, that's really what this is about. We realize that there wasn't one common definition. To some it's lessening your dependence on foreign oil. For other people it was affordability. So, we sought to bring all of those concerns together and in one quantifiable index. And you can isolate the things that matter to people. When we put on a windfall profits tax, what happened to our energy security? Did our risks go up or go down? They actually went up. What happens when we put CAFE standards on? Our inner security risk went down. So, you can really isolate things and I think that will be instructive for Congress and the administration.
Monica Trauzzi: So, you look at four primary areas to measure energy security and you mentioned a couple before, geopolitical, economic, reliability, and environment. So explain how those four areas sort of give a well-rounded look at the scene.
Karen Harbert: Well, certainly from a geopolitical standpoint it is a global energy market, so we can't just be looking within our 50 states. We have to look at events across the globe. Economics have a big, big impact on energy security. The volatility, price impacts dramatically change our energy future, how much money we spend as a household or as a business on energy. And reliability, if you don't have the energy available when you need it the costs of doing business go up. And then lastly, and certainly importantly, is the environmental risk. There is an environmental risk associated with our energy usage and we need to be able to incorporate that in so we have the most comprehensive look of what constitutes energy security and what risks we have.
Monica Trauzzi: How do you guarantee that the index provides a balanced representation of where our energy security stands?
Karen Harbert: Well, we've done the best I think we can. We've taken 37 very distinct metrics and we have talked to industry, a broad spectrum of industry. We've gone to academic institutions, we've gone to think tanks, and have them peer review this to help us improve it and we'll improve in overtime. We're going to go to other institutions across the country, because we're going to release this annually. And so this will help us, over time, as a barometer of how we are or are not making progress.
Monica Trauzzi: So, then can you take a piece of legislation like the Kerry-Lieberman bill that was just introduced in the Senate and make an energy security assessment of how that will pan out?
Karen Harbert: Absolutely and that's how this is intended to be, to show policymakers, in real-time, if you implement this piece of legislation, Kerry-Lieberman for example, what it would or would not do to our energy security risks. And, in the case of Kerry-Lieberman, as soon as the analysis is finished from the government agencies we'll be able to put that into our matrix, into our model and be able to show what this means for energy security as it relates to cost, environmental benefit and also the diversity of our supply.
Monica Trauzzi: So, according to your index, the year 1980 was ranked at 100 because it was a period of high energy risk. So, are all other time periods being compared to that one?
Karen Harbert: 1980 is the worst year on record of the time period that we were measuring and so you do compare it to 1980 and you can see today we are at about 85 as compared to 1980. So we're a little bit better off, but the indicators going out is that we're going to approach 1980 levels very, very quickly and less we do something dramatically different from a policy standpoint.
Monica Trauzzi: OK, interesting stuff. We'll end it there. Thank you for coming on the show.
Karen Harbert: Thanks Monica.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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