Record high energy prices and a recent trip to Europe prompt these thoughts on our energy future. The current energy situation, i.e., high prices, high demand, and tight supplies, is a glimpse of what life in a carbon constrained world looks like. We’re entering the early stages of a transition from fossil fuels that will likely continue until mid-century.

Vaclav Smil of the University of Manitoba describes the significance: “We are now at a point in time comparable to 1850, which marked the outset of the last great energy transition. Then, about 85 percent of the world’s total primary energy supply came from biomass fuels. In 2005 about 85 percent of the total supply originated from fossil fuels.... A non-fossil world may be highly desirable, but getting there will demand great determination, cost and patience.”

We’ve seen this movie before. Thirty years ago, high inflation and then record oil prices caused both businesses and consumers to drastically alter their energy consumption. The results were impressive. The Energy Information Agency calculates that U.S. energy intensity (a measure of energy used per unit of GDP) fell by 42 percent between 1980 and 2007. That explains why to date high energy prices have not derailed our economy.

Oil drives the global transportation system. Demand has been growing steadily, primarily because consumers in the developing world are discovering the tremendous convenience afforded by cars powered by the internal combustion engine. China’s vehicle fleet numbers just 37 million cars (the U.S. has some 250 million). Any guess as to the direction the Chinese fleet number is headed?

If Europe represents the future for American automobiles, here’s what we can expect. A wide selection of high quality four door sedans, small SUVs and trucks, all powered by highly efficient, clean diesel engines. The days of the internal combustion engine may indeed be numbered. Their demise will come when the price of gasoline rises high enough to make alternative technologies cheaper than gas-powered cars. Judging from what I saw in über-green Europe, where gas sells at the equivalent of $9 a gallon, we’re not yet close. Hybrids and plug-in electrics may be the future, but in Europe at least, they seem a long way off.

High prices induce consumers to use an increasingly valuable resource more wisely. They respond in all sorts of ways, for example by leaving the water ski boat on the trailer for the summer or taking the Honda, rather than the Suburban, to weekend soccer games. Given enough time, families react by purchasing hybrids and substituting public transportation for driving to work. (I’m curious to see the latest rider-ship numbers for Bozeman’s Streamline bus system.)

Expensive carbon is essential if we are to have any hope of reducing CO2 emissions, the major greenhouse gas. Yale economist Willam Nordhaus’ new book, A Question of Balance: Weighing the Options on Global Warming Policies, offers this advice for evaluating politicians’ solutions. He writes: “Whether someone is serious about tackling the global-warming...can be...gauged by...what he says...about the carbon price. Suppose...[he]...proposes that the nation...move urgently to slow climate change. Suppose [he] proposes regulating the fuel efficiency of cars, or requiring high-efficiency light bulbs, or subsidizing ethanol, or providing research support for solar power—but nowhere does [his] proposal raise the price of carbon. You should conclude that the proposal is not really serious and does not recognize the central economic message about how to slow climate change.... The rest is at best rhetoric and may actually be harmful.”

Does our energy future then include only a set of dismal choices, say the risks of nuclear power or air pollution from new power plants or threats to wildlife from oil exploration in the Arctic National Wildlife Refugee or the Rocky Mountain Front? No. But our politicians seem determined to hide the inconvenient truths and offer a hash of pain free pabulums.

Today’s high prices bring the tradeoffs we face into sharp focus. For example, we’ve made a decision to reduce oil supply by keeping 85 percent of the U.S. coastline off-limits to oil and gas exploration. If you value this, then instead of complaining about pain at the pump, get on your bicycle. In Amsterdam, that’s what people do.