William D. Nordhaus in the New York Review of Books:
Is energy our friend or our enemy? In their personal lives, most people regard energy as an essential friend. It powers our computers, warms our homes in the winter, fuels our cars and planes, and provides a necessary input to produce virtually everything we use. Modern life would be inconceivable without the friendly side of energy.
But in recent decades, energy has also become an enemy. Presidents have lamented our “addiction to oil,” we have gone to war to protect oil fields from hostile powers, and air pollution from fossil fuels kills tens of thousands of people every year. Perhaps most worrisome, the accumulation of greenhouse gases such as carbon dioxide threatens to change the earth’s climate in ways that are unpredictable and potentially dangerous.
The two faces of energy are the primary reason why energy policy is so controversial and tangled. We need national policies that address the enemies of pollution and global warming. But because energy is such a large part of consumer budgets and so central to our advanced economies, people are reluctant to allow energy prices to reflect the true social costs of energy consumption. We see this tradeoff play out in energy and environmental policy year in and year out.