A WIN-WIN PLAN FOR THE ECONOMY, THE ENVIRONMENT, AND A LOWER-CARBON, CLEANER-ENERGY FUTURE

 Michael E. Porter, David S. Gee, and Gregory J. Pope

Harvard Business School/The Boston Consulting Group

EXECUTIVE SUMMARY

Unconventional gas and oil resources* are perhaps the single largest opportunity to improve the trajectory of the U.S. economy, at a time when the prospects for the average American are weaker than we have experienced in generations. America’s new energy abundance can not only help restore U.S. competitiveness but can also create geopolitical advantages for America. These benefits can be achieved while substantially mitigating local environmental impact and speeding up the transition to a cleaner-energy future that is both practical and affordable.

However, America is currently caught in an unproductive, divisive, and often misinformed debate about our energy strategy, which threatens our nation’s economic and environmental goals. There is an urgent need for the U.S. to get on a new path. We set forth an overall strategy for unconventional energy development that meets the most important goals of industry, environmental stakeholders, and governments, and allows the U.S. to responsibly achieve the full benefits of this unique and vital opportunity.

THE U.S. COMPETITIVENESS CHALLENGE

The ability of the U.S. economy to improve the standard of living of the average citizen is weaker than it has been in generations. The deterioration began well before the Great Recession and is reflected by slow job growth and stagnating wages, especially for middle- and lower-middle-class Americans. While U.S.-based multinational businesses have outperformed those in other advanced economies, small businesses in the U.S. are registering eroding performance, and business failures have outnumbered new startups from 2009 through 2012—the last year of available data—for the first time since at least the 1970s. U.S. growth has exceeded that of Europe and Japan in recent years, but our growth is still the slowest in many decades.

America’s poor economic performance is not cyclical but structural, and it reflects an erosion of the nation’s fundamental competitiveness. As documented by the U.S. Competitiveness Project at Harvard Business School (HBS), the overall quality of America’s business environment has declined in key areas, including skills, infrastructure, costs of doing business, and corporate tax structure. While the U.S. retains core strengths, partisan political gridlock has meant that little progress has been made on reducing any of America’s emerging weaknesses. This project is motivated by that gridlock, which is also threatening one of America’s emerging strengths: unconventional energy development.

AMERICA’S UNCONVENTIONAL ENERGY ADVANTAGE

America’s abundant and low-cost unconventional gas and oil resources are a once-in-a-generation opportunity to change the nation’s economic and energy trajectory. The U.S. now has a global energy advantage, with wholesale natural gas prices averaging about one-third of those in most other industrial countries, and industrial electricity prices 30–50% lower than in other major export nations. That means major benefits for industry, households, governments, and communities, while reducing America’s trade deficit and geopolitical risks. The U.S. has had a 10- to 15-year head start in commercializing unconventional resources versus other countries. Though the recent decline in world oil prices has affected the short-term prospects of U.S. unconventionals, low prices are unlikely to significantly impact the fundamental U.S. competitive advantage over the next several decades.

Link to complete text of Plan:

http://www.hbs.edu/competitiveness/Documents/america-unconventional...