Heritage Foundation Leadership for America

In 1980, President Carter signed legislation that established the Synthetic Fuels Corporation, a government entity intended to drive research into synthetic fuels and establish a synthetic fuels program that would lead to energy independence. The Corporation was budgeted $19 billion by Congress, to be spent over some years. The Synthetic Fuels Corporation is one of the government's most intrusive efforts in the energy markets.

So how well did it work? Given that we still fill our tanks at the petrol pump and that almost no one under 25 has even heard of the Synthetic Fuels Corporation, the answer should be obvious: it was a colossal failure.

The National Academies book The Government Role in Civilian Technology describes several of the mechanisms of that failure:

The failure of the federal government?s effort to create a synthetic fuels industry yields valuable lessons about the role of government in technology innovation. The synthetic fuels program was established without sufficient flexibility to meet changes in market conditions, such as the price of fuel. Public unwillingness to endure the environmental costs of some of the large-scale projects was an added complication. An emphasis on production targets reduced research and program flexibility. Rapid turnover among SFC?s high level officials slowed administrative actions.

It is hard to imagine how these factors could be overcome by a government energy development program, even today. Is it surprising that the program was so far away from marketplace realities when it was designed, as a government-directed research and development program, to go where the market was unwilling to tread?

There's more:

Energy programs of that time were hindered by excessive political interference. Political influence on funding allocation decisions, selection of R&D projects, or the direction and conduct of scientific research is counterproductive and damaging to the success of federal technology efforts. Fuel-cell projects under the SFC, for example, were allotted to each of the 50 states, regardless of economic viability. Implementation of energy performance standards for buildings was held back by complex regulations. The clean coal technology project was hampered by congressional involvement in technical design and operational management. Although programs such as the tertiary oil recovery initiative and the R&D program in photovoltaic cells attained some success, these technologies were not widely adopted.

To summarize these last points, politicians play pork-barrel politics and government is really bad at picking marketplace winners. Has any of this changed since 1980? Would a new directed effort by the government to develop alternative fuels, promote "renewable" energy sources, or otherwise massively reconfigure energy production work? It is not impossible, perhaps, but all history points instead to large expenditures, particularly of the corporate-welfare variety, with little public benefit and less change. After all, for all the spending on renewables in recent decades, how many can say that their homes are lighted by windpower?

President Reagan had this to say in 1984 as he began the dismantlement of the Synthetic Fuels Corporation:

Synthetic fuels held promise as an economically competitive alternative to traditional fuel sources. Proponents of the current law argued that the Federal program would have little or no impact on the deficit and established an extremely rapid and ambitious schedule for developing a commercial synthetic fuels industry.
...
[T]he presumptions that underlie the current synthetic fuels program have proven at variance with the realities of the market place. It is now apparent that developing a commercial synthetic fuels industry at the pace envisioned by the Energy Security Act of 1980 would require enormous direct budget outlays that would not be offset by any economic benefits.

Proceeding down the path set by current law would thus result in the inefficient use of billions of dollars. It would also grossly distort the market place for synthetic fuels, possibly creating an industry that would be permanently dependent on government subsidies, not the commercially-viable industry envisioned by Congress in 1980.

We ask, can anyone proposing that the federal government embark on a new Odyssey to energy independence tell us how the natures of the marketplace and of government spending have changed since 1984 so as to prevent another Synthetic Fuels Corporation? Can anyone proposing such a major energy initiative tell us why what didn't work then, didn't work for renewables, and even now doesn't seem to be working for hydrogen fuels (albeit at a much lower cost; if wasteful spending is inevitable, let that spending be small and nondistortionary) will bear fruit in the future?

Also: Reason's Ronald Bailey offers an historical timeline of government's quest for energy independence, starting with President Nixon's "Project Independence" in 1974. Bailey concludes that, of modern presidents, Ronald Reagan made the greatest strides towards real energy independence: "Reagan understood that for most Americans lower gasoline prices and lower home electric bills are all the energy independence they want or need."