ECONOMIC

payoff from such projects depends critically on future Government policieswith respect to environmental control, leasing of mineral rights, and importrestrictions. It may therefore be unusually risky for private investors toundertake this research. Many kinds of research and development concerningenergy involve benefits to society as a whole that cannot be fully capturedby the investor, so that it is unprofitable for any one firm to conductthe research. Finally, the interdependence among projects provides a compellingcase for the Government to provide an overview and to coordinateresearch and development in the energy field, though not necessarily toconduct the research itself.There is an additional potential benefit that might result from an energyresearch and development program. By making a coordinated effort todevelop those technologies required to ensure self-sufficiency, the UnitedStates will improve its bargaining power vis-a-vis the oil-exporting countries.In this way a federally coordinated energy research and development programmay play an important role in forcing the world price of oil down tothe competitive level.A major component of Project Independence is a stepped-up program ofenergy research and development. The Administration has recommendedan expenditure of $10 billion over a 5-year period beginning with fiscal1975. This program is principally addressed to the accomplishment of sixtasks:1. Improving the efficiency of energy use and of the conversion of fossilfuels to electric power.2. Increasing the domestic production of petroleum and natural gas.3. Expanding the use of coal.4. Increasing the use of nuclear power.5. Developing renewable energy sources.6. Reducing the environmental effects associated with all stages of energyproduction and use.The Administration's research and development program represents animportant step in moving the economy toward an established capability ofbeing self-sufficient in energy production. However, the program deals onlywith the technological aspect of energy production and use.Energy production is limited not only by the state of current technology,but also by economic incentives. The prospect of higher energy prices willaccelerate the development and application of technological advances bythe private sector. If the private sector is given a larger role in Project Independence,expenditures on research and development will be more closelygeared to those techniques likely to become commercially applicable, thusfurther assuring the success of the program.ENERGY AND ENVIRONMENTAL POLICYThe Nation's urgent need for adequate and dependable supplies of energyhas raised concerns about how efforts to fill the need will affect the goal of527-867 O - 74 - 9125