Follow the Oil Money

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Comparable improvements can be made in industrial efficiency as well as consumer energy usage if governmental standards are mandated and the next President leads a national campaign for energy efficiency.

Major increases in energy demand over the next decade will come from China and India. China, for example, is building one new coal-fired electrical plant per week, 438 plants in all, which are highly inefficient and will create an environmental disaster. Growth in Chinese auto production will result in more cars on its roads by 2016 than in the U.S. The only way the U.S. can influence this situation is to clean up our own house by setting new standards for energy efficiency with advanced technology, and sharing our technological expertise with the Chinese and Indians.

Expand Supply

With regard to the supply side, both Presidential candidates are urging increased research investments into renewable sources of energy. I would go further and propose a "National Institute of Energy" (NIE), built on the model of the National Institutes of Health (NIH). The NIE should be funded at $20 billion to $30 billion per year from the savings in reducing war expenditures in Iraq. NIE would lead government investment in a wide array of energy technologies, fund research at the leading universities and private research institutions, and encourage startup companies to develop these new energy sources into cost-effective vehicles.

Cellulosic ethanol, hydrogen, clean coal, nuclear, solar energy, wind power, and geothermal are just a few of the technologies where genuine research is required to make these energy sources safe, cost-effective, and scalable to mass production. Without this basic research, these renewable sources will serve only a small fraction of the world's energy demand. Supporting basic research is far better than subsidizing high-priced alternatives, as the U.S. has done with corn-based ethanol, wreaking havoc on corn prices.

In reality, no matter how much research goes into renewable energy, these sources can supply only a small fraction of the world's growing energy demand in the next 25 years. We simply cannot wait that long to expand supply. Instead, the U.S. and Canada should open up sources of oil and gas within North America and in offshore waters. With today's technology, these sources can be explored with minimal environmental impact. This will keep these funds at home, instead of putting another $4 trillion to $5 trillion into the hands of less friendly governments. Just the announcement of new sources being opened up will put a significant dent in oil prices, as it will help quell concerns about future shortages.

The same goes for restarting the U.S. nuclear program, our best intermediate option. The French nuclear program, funded aggressively since the 1970s, accounts for more than 80% of French electricity. Nuclear energy presents issues with waste storage and safety assurance, but these problems can be solved, as the French have done, if we have the national will.

Only an integrated energy plan like this one can restore our economy and stem the flow of U.S. dollars into the coffers of foreign governments. If we don't move ahead with a sense of urgency, our country is destined to become a declining economic power in the world.

George, professor of management practice at Harvard Business School, is the author of two best-selling books, True North and Authentic Leadership. The former chairman and chief executive of Medtronic, he serves on the boards of ExxonMobil, Goldman Sachs, and Novartis.