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Introduction

In 1979, in the middle of an energy crisis, Jimmy Carter had solar panels installed on the roof of the White House. . . . "A generation from now," said President Carter, "this solar heater can either be a curiosity, a museum piece, an example of a road not taken, or it can be a small part of one of the greatest and most exciting adventures ever undertaken by the American people, harnessing the power of the sun to enrich our lives as we move from our crippling dependence on foreign oil." . . . Ronald Reagan had the panels taken down." (Herbert 2010).

In this article, data will be presented which show that the United States' dependence on foreign oil has resulted in repeated cycles of economic recession following peaks in crude oil prices. In response, when crude oil prices are high, additional government funding is allocated to alternative energy research. However, when oil prices decline, funding for alternate energy research is drastically reduced. Data will also be presented which show that when less money is allocated to research on alternative energy, fewer related patents are granted. As a result, expertise and critical information obtained during cycles of high funding are likely lost during periods of lower funding, putting our country at a strategic disadvantage. U.S. energy policy could thus be described as short-sighted, focused simply on maintaining an ample supply of oil at a low cost to consumers. There is little long-term vision for preparing against uncertain future oil supplies from politically unstable regions, and thus protecting the U.S. economy against these cycles of recession. The challenge is how to sustain research and development initiatives to develop alternative energy sources, breaking the cycle of sporadic effort.

The most recent recession and current economic slump have had a devastating effect on employment rates, prosperity, and well-being. In addition to the economic ramifications, continued U.S. reliance on petroleum products for energy has resulted in increasing concentrations of carbon dioxide in the atmosphere, generally believed to lead to climate change (IPCC 2010 and NRC 2001). Increasing atmospheric carbon dioxide concentrations in the atmosphere are being exacerbated by China's unprecedented economic growth. Due to both the burning of fossil fuels and cement production, China passed the United States as the world's largest carbon dioxide emitter in 2006 (Heinhorst 2010). Climate change and other man-made pollution have the potential to negatively affect not only future economic growth but also health.

The information in this article can be used as a platform for classroom discussions on energy, environmental science and to promote civic engagement. The approach used is in alignment with the National Science Foundation supported SENCER (Science Engagement for New Civic Engagements and Responsibilities) project with goals to:

• Involve more students in science, technology, engineering and mathematics (STEM) courses
  
• Help students connect STEM learning to their other studies
  
• "Strengthen students' understanding of science and their capacity for responsible work and citizenship." (SENCER Ideals 2010)
  

An additional aim of this work, beyond the SENCER goals, is to present multidisciplinary materials that could be used to foster classroom discussions in not only STEM subjects, but that would also be relevant to liberal arts classes such as economics and global politics as well. It is hoped that this material will engage students who may not have initially been interested in science, in the application of science policy to real world problems. This could possibly create more enthusiasm for taking STEM classes in the future.

Historical Perspective

The federal government first became involved in energy research and development after the development of nuclear power in the late 1940s, financing large-scale civilian research and development (Federal Financial Interventions [FFI] 2007, 30). In 1954, Atomic Energy Commission chief Lewis Strauss even predicted that one day civilian nuclear reactors would produce electricity "too cheap to meter" (Eisler 2009).

In 1973 the Organization of Petroleum Exporting Countries (OPEC) initiated an oil embargo, greatly restricting supplies and quadrupling the cost of oil. Later in that decade, in 1979, oil supplies were again disrupted, resulting in another significant increase in the cost of oil. Research on alternative sources of energy accelerated in the 1970s as a direct result of these oil crises in 1973 and 1979, with the greatest effort focused on nuclear energy and converting coal to liquid fuels. Improving the Fischer-Tropsch synthesis, a process for converting the nation's large reserves of coal to liquid fuels, received increasing attention as a strategy for achieving energy self-sufficiency. The process was developed in coal-rich but petroleum poor Germany in the 1920s, and was used by both Germany and Japan in World War II to produce synthetic fuels. Since 1955, the process has also been used in coal-rich South Africa by SASOL Ltd. (Suid Afrikaanse Steenkool en Olie [this is Afrikaans for South African Coal and Oil]) to convert coal and natural gas to liquid fuels and chemicals. However, once energy prices decreased in the 1980s, interest waned and research dollars dried up; momentum to develop alternative fuels was largely lost. This pattern is seen in the private sector as well. Over the period 1977– 1980, when gasoline prices were high, General Motors produced the Electrovette, a battery-powered Chevette concept car. When gas prices collapsed, the project was abandoned. With the recent rapid rise in gasoline prices, attention has returned to developing alternative energy sources. Chevrolet recently introduced the Volt, an electricity powered car, in an attempt to capture demand for cars fueled by cheaper alternative energy compared to gasoline (Tingwall 2011). Another lost opportunity is concentrating solar power technology. The harnessing of solar power was first introduced by Frank Shuman in 1912. After the oil crises of the 1970s, the U.S. Department of Energy (DOE) collaborated with Luz International to build nine plants from 1985 – 1991 in the Mojave Desert, California. Following a period of relatively cheap oil in the 1990s, however, another large scale solar plant was not built again until 2007 (Tullo 2010). There was thus a period of nearly twenty years when the opportunity for the United States to expand alternative energy sources and reduce its dependency on imported oil was lost.

Current evidence strongly suggests that the consumption of fossil fuels is a major contributor to climate change due to greenhouse gas emissions, which could result in potentially devastating economic losses. As a consequence, research on alternative energy sources has increasingly focused on renewable energy such as sunlight, wind, biomass, and geothermal energy. Due to the expense and risks associated with the storage and disposal of nuclear waste, as well as high-profile nuclear disasters such as Chernobyl, Three Mile Island and most recently the Fukushima Daiich nuclear power plant in Japan, there is staunch opposition to the expansion of nuclear power. Similarly, interest in converting the nation's vast reserves of coal to liquid fuels has waned. Coal is also a nonrenewable fossil fuel and its use as a fuel adds to CO₂ emissions. There are also health and safety risks for coal miners as well as environmental damage and pollution associated with mining coal.

In 2009, the United States was consuming an estimated 18,690,000 barrels of oil per day, more than the entire European Union, and more than twice as much as China, which used an estimated 8,200,000 barrels per day. These numbers show the continued reliance of the U.S. economy on fossil fuels (CIA World Fact Book 2010). However, a bright spot is the slowly increasing percentage of alternative energy use after years of increasing reliance on imports, as shown in Table 1.

Table 1 U.S. Energy Consumption by Energy Source (2002–2006) in Quadrillion Btus (EIA 2007b)

^a Ethanol blended into motor gasoline is included in both "Petroleum" and "Biomass." 

^b Includes supplemental gaseous fuels. 

^c Petroleum products supplied, including natural gas plant liquids and crude oil burned as fuel. 

^d Biomass includes: biofuels, waste (landfill gas, MSW (Municipal Solid Waste) biogenic, and other biomass), wood and wood-derived fuels. Data for 2006 is preliminary.

Economic Impacts

The relationship between the percent of the nominal gross domestic product (GDP) and and energy expenditures (total, petroleum and natural gas) is shown in Figure 1.

Figure 1 Energy Expenditure Share of the Economy (EIA 2001, Fig. 1)

Dates of economic recession associated with increases in oil prices are shown in the shaded regions: November 1973–March 1975 due to the Arab oil embargo, and January–July 1980 and July 1981–November 1982 after the Iranian Revolution (National Bureau of Economic Research [NBER] 2000). Lines were drawn in by the authors. There was also a recession from July 1990–March 1991, when a small bump in petroleum prices occurred. Not shown are recessions from March 2001–November 2001 and the most recent recession, December 2007–June 2009. The figure shows that during the oil crisis of the 1970s, oil expenditure constituted a larger portion of the GDP. This has consequences on economic growth. There are spillover effects to the rest of the economy from higher oil prices such as higher costs of production, higher inflation, and higher rates of unemployment. All of these factors then contribute to lower economic growth and recession.

Federal Energy Research and Development Budget

The data provided in the Appendix (FFI 2007, 40) were released by the Energy Information Administration (EIA), the independent statistical and analytical agency within the DOE. As discussed above, higher prices lead to lower or negative growth and therefore recession. To reduce the volatility of the U.S. economy because of its dependence on oil, upon his election in 1976, President Jimmy Carter dedicated unprecedented funding to developing alternative energy in order to make the United States energy self-sufficient. After his defeat in 1980 and the election of President Ronald Reagan in 1980, greater stability in oil producing regions lead to a decline in oil prices through most of the next two decades. President Reagan was a follower of classical economic theory that advocated a limited role for government intervention in the economy. The practical application of this theory resulted in a reduction in government spending in the 1980s; therefore, the funding of alternative energy started by President Carter was drastically cut. Funding levels decreased from $6.5 billion in 1978 to $1.2 billion in 1987 (in 2007 dollars). Spending increased under the first President George H.W. Bush, took a dip, then slowly increased under President Clinton in the 1990s, averaging $1.9 billion to $2.5 billion. (EIA 2007a, ch. 3, pg. 1)

A plot of the total annual DOE research-and-development (R&D) expenditures (in million 2007 dollars) from 1978 to 2007, summarizing the trends just discussed, is shown in Figure 2, (data given in the Appendix). Figure 2 clearly shows a sharp dip in funding in the early 1980s and a gradual overall increase since the mid-1990s. Funding levels still have not returned to their peak levels of the late 1970s.

Figure 2 Summary for DOE R&D expenditures, 1978–2007 (million 2007 dollars)

Patents

The number of patents provides a measure of the outcomes of the innovation process. In the energy sector, R&D spending and the numbers of new patents are closely linked. (See Figures 3–7.) Alternative energy patents rose from 102 in 1976 to a high of 228 in 1981, then declined to a low of 54 in 1994 (Margolis and Kammen 1999). The number of successful U.S. patent applications (by year of application to remove any time lag between application and approval) and public research and development investment was compared (Kammen and Nemet 2005). These records of successful U.S. patent applications were used as a proxy for the intensity of innovative activity. A strong trend between public R&D and patents across a variety of energy technologies was found. For example, in the areas where R&D decreased such as wind technology, nuclear fusion, and photovaltics there has been a trend of declining patents. As can be seen in Figure 5, nuclear fission provides a counter-example to the trend of the relationship between R&D expenditure and patents observed with the other types of energy sources. There is some evidence to suggest that the benefits of R&D may not be realized until two to three decades after the initial investment (Anderson and Bird 1992). Thus, the increase in the number of patents in nuclear fission over this period may be a response to the greater investment in nuclear technology during the oil crisis of the 1970s. It can also be seen that there is a relationship between current events, energy policy and innovation. Note that U.S. public research and development spending on nuclear fission dropped after the Three Mile Island disaster in 1979. A dip in U.S. patent applications can be seen beginning in 1986 after the Chernobyl disaster followed by an increase in 1990, coinciding with the first Iraqi War and an increase in oil prices. Continued European and Japanese interest in nuclear fission for energy in the 1980s and early 1990s may also explain why the relationship between nuclear fission and patents differs from the others. This example highlights the complexity of the relationships between energy, technology, and economics. It should be noted that the investment costs in these different technologies will be different which may impact on technological innovation. For example, it is a lot less costly to develop a wind turbine than invest in nuclear technology. Conversely, where R&D expenditure has increased for fuel cells, there has been a trend of an increase in patents. The following figures are evidence that providing funds for R&D is essential to ensuring technological innovation in the energy sector.

Figure 3 Wind R&D and Patent Applications (Kammen and Nemet, 2005)

Figure 4 Fuel Cell R&D and Patent Applications (Kammen and Nemet, 2005)

Figure 5 Nuclear Fission R&D and Patent Applications (Kammen and Nemet, 2005)

Figure 6 Nuclear Fusion R&D and Patent Applications (Kammen and Nemet, 2005)

Figure 7 Photovoltaics R&D and Patent Applications (Kammen and Nemet, 2005)

Hope for the Future

On a worldwide scale, Europe, Asia, and the United States are currently investing in renewable energy. Globally about 19 percent of energy consumption is now from renewable sources. The World Intellectual Property Organization (WIPO) is one of the sixteen specialized agencies of the United Nations. WIPO was created in 1967 to promote creativity and the protection of intellectual property throughout the world. Patent information on renewable alternate energy, collected by the WIPO, and provided in their report, "Patent-base Technology Analysis Report — Alternate Energy Technology" (WIPO 2006) is provided in Figure 8. The left-hand side of the y-axis is the total number of patents. The right-hand side of the y-axis is the growth rate in the number of patents. The bars show the annual growth rate. From this figure, we can see that patents for renewable alternative energy are growing.

Figure 8 SPTO Data on Renewable Energy Patent Applications by Year, 1978–2004

Conclusion

Rapid economic growth in emerging economies such as China and India has intensified world demand for fossil fuel. This increased demand has lead to rising prices. As discussed, rising energy prices have been associated with lower growth and recessions in the past. To avoid economic volatility, it is essential that there is investment in the use of viable renewable energy sources. Besides the economic benefits, renewable energy sources can contribute significantly to a reduction in greenhouse gas emissions. Another advantage over fossil fuels, which are concentrated in a few regions of the world, is the wider availability of many renewable energy sources such as biomass, the wind, the sun, geothermal energy, waterfalls and waves to create hydroelectricity.

The U.S. economy is faced with the challenge of maintaining a commitment to research and development funding during the current economic downturn. Research shows that a decline in investment leads to a decline in patents and therefore technological innovation.

It has been shown that the United States' commitment to supporting funding for alternative energy is intermittent, and declines during periods of stability in energy costs. In closing, ponder whether history is repeating itself. President Barack Obama as a sign of his commitment to promoting sustainable energy has commissioned the installation of solar panels and solar water heaters on the White House roof (Fifield 2010).

Application to the Classroom

The material covered in this article can be used to foster classroom discussion on the relationship between geopolitics, government policy, and scientific research. The questions below could be asked in a social science class such as an applied macroeconomic class or a humanities course such as 20th century history. For example, classroom discussion can be used to help students understand the link between oil prices and economic growth. After students understand this link, students can discuss how economic policy can be used to promote the development and use of alternative energy sources. This classroom project has been applied to an undergraduate economics course for students at the University of Aberdeen, Scotland. Many of the students enjoyed seeing the link between economic theory and real world applications These questions could also be asked in STEM subjects such as environmental science, general chemistry or introductory chemical engineering courses. For the STEM classes (including social sciences) there are further extensions on the material which are discussed below.

What alternative energy source might have the quickest impact on the use of oil in the United States? How does the "not in my back yard" (NIMBY) reaction impact implementation? Can you recall any current events where the NIMBY reaction impeded or stopped installation of alternative energy sources such as wind turbines, etc.? What are some of the environmental impacts of alternative energy sources?

What type of policies should the United States implement to encourage alternative energy sources? What could be the motivation of U.S. policy to continue to fund alternative energy sources and for citizens to accept their installation?

What type of activities could the average citizen engage in to reduce dependence on fossil fuels?

How would you propose that the United States end the cycle of recessions when oil prices peak? What are your feelings on tapping into the United States' strategic oil reserves to mitigate increasing fossil fuel costs?

What effect would a strong alternative energy policy have on U.S. relations with oil-producing countries? What about economic relations with other countries that are dependent on oil for energy?

What political, global effect would be felt if U.S. energy sources were at least 50 percent non-fossil fuel based? What parts of the U.S. economy might be affected?

A further extension of this topic is student research on alternative energy choices; discover strengths, weaknesses and impediments to implementation for the different types of alternative energy. Students could then report their findings in a classroom setting and/or write a research paper. Students could also research the strengths and weaknesses of using coal to produce electricity, "fracking" to recover natural gas, etc. If these assignments are done by groups of students, this type of exercise will promote team work, information literacy and oral and written communication skills.

Acknowledgements

The authors wish to express their gratitude to A.E. Dreyfuss who proofread this article and made valuable contributions on strategies for implementing the material into the curriculum. We would also like to note our appreciation of Dr. Roman Kezerashvili, chairperson of the New York City College of Technology Physics Department, for his comments on nuclear fission patent applications. Written permission to reproduce Figures 3–7 from Kammen and Nemet (2005) was obtained from the authors of this work.

About the Authors

Heather Brown (mailto:h.brown@abdn.ac.uk.brown@abdn.) is a research fellow in health economics at the University of Aberdeen, Scotland. She obtained a Ph.D. in health economics from the University of Sheffield in August 2009. Her dissertation was titled "The Economic Causes and Consequences of Obesity: Three Empirical Applications." She received a Masters degree in economics and development economics from the University of Nottingham in December 2005 and a B.A. in economics and politics from McGill University, Montreal, Canada, in June 2003. Her interests are applied health economics, labor economics, and the economics of the family.

Pamela Brown (pbrown@citytech.cuny.edu) is dean of the School of Arts and Sciences at New York City College of Technology — City University of New York. She earned a Ph.D. in chemical engineering from Polytechnic University, an M.S. in chemical engineering practice from Massachusetts Institute of Technology and a B.S. in chemistry from the University at Albany — suny. Her current interests are in developing programs and strategies to improve student success, including several SENCER projects on her campus.

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Appendix 

Summary of U.S. DOE R&D Expenditures, 1978–2007 (million 2007 dollars)