Explaining Energy Gridlock

Explaining Energy Gridlock

April 22, 2013
Originally published in National Review

Why is there is no momentum in Congress for the “comprehensive energy and climate legislation” once proudly championed by the Obama administration and environmental activists?

Starting with the most obvious reasons, 29 Democrats who voted for the Waxman-Markey cap-and-trade bill in June 2009 got pink slips from their constituents in November 2010. Key to defeating Waxman-Markey was its exposure as a stealth energy tax. This prompted a search for “other ways to skin the cat,” but finding other ways to fool the public was not easy.

With few options to pick from, some climate activists now advocate carbon taxes. Most congressional Democrats, however, are reluctant to tax carbon unless the GOP gives them bipartisan cover. But most Republicans realize that if they cave on carbon taxes, they will demoralize and divide their base.

In addition, few members of Congress want to take responsibility for raising energy prices during a period of high unemployment and anemic economic growth.

Fading Worldviews

Turning to deeper reasons for legislative torpor, alarm about climate change and dependence on foreign oil no longer has the intellectual cachet it did when Congress enacted major energy legislation in 2005 and 2007. That period was not only a high watermark of U.S. oil import dependence, it was also a time when Al Gore’s An Inconvenient Truth, the Bali Road Map, and the IPCC’s Fourth Assessment Report (AR4) set the terms of national debate on climate change. A lot has happened since then.

Washington’s angst about oil embargoes, supply disruptions, and the link between Mideast oil and terror was always overblown, as Cato Institute scholars Jerry Taylor and Peter Van Doren explain:

· Because oil is a globally-traded commodity, the U.S. can circumvent any likely embargo by purchasing oil via third parties. Indeed, U.S. oil imports actually increased after the 1973 Arab oil embargo – from 3.2 million barrels per day in 1973 to 3.5 mbd in 1974.

· Petro-states have more to lose from catastrophic disruptions than do their customers, which is why there hasn’t been one since the Iranian Revolution.

· There is no correlation between OPEC profits and cross-border incidents of Islamic terror. The likely explanation is that terrorist attacks are low-budget operations (the 911 plotters spent less than half a million dollars) and therefore would not be much affected by declines in oil prices or petro-state revenues.

In recent years, the national security rationale for regulating America ‘beyond petroleum’ has become increasingly implausible, as advances in unconventional oil and gas production transform North America into a major producing region. Imports as a share of U.S. petroleum consumption declined from 60% in 2005 to 45% in 2011. More than half of those imports came from the Western hemisphere, and Canada’s share was more than double that of Saudi Arabia. In both 2011 and 2012, petroleum products were the top U.S. exports. These trends erode the fashionable energy angst of previous decades.

A March 2012 Citi report concluded: “With no signs of this growth trend ending over the next decade, the growing continental surplus of hydrocarbons points to North America effectively becoming the new Middle East by the next decade; a growing hydrocarbon net exporting center.” Analyses by Citi, Wood McKenzie, and IHS Global Insight support the assessment of Manhattan Institute scholar Mark Mills that “unleashing the North American energy colossus” could create millions of new jobs by 2020 and provide hundreds of billions in cumulative new federal, state, and local tax revenues.

In short, a bright future for hydrocarbon energy now competes in the public mind with yesteryear’s gloomy forecasts of increasing oil depletion and dependency.

As for climate alarm, the Climategate emails revealed that top climatologists were schemers who used the pretense of scientific objectivity to advance a political agenda. This was a serious setback to their credibility and the policies they promoted.

Also deflating the push for coercive energy transformation is the net lack of warming in 17 years. There are competing explanations, but a plausible hypothesis, based on recent studies ably summarized by Cato Institute climatologist Chip Knappenberger, is that the climate system is less sensitive to greenhouse forcing than “consensus” science had assumed. What cannot be denied is that there is a disconnect between the IPCC’s best estimate of projected warming and observations over the past decade.

But wait, there's more! Numerous studies (summarized here and here) undercut the credibility of scary climate change impact forecasts. A few examples:

· King et al. (2012): The rate of Antarctic ice loss is not accelerating and translates to less than one inch of sea-level rise per century.

· Weinkle et al. (2012): There is no trend in the strength or frequency of land-falling hurricanes in the five hurricane basins during the past 50-70 years.

· Range et al. (2012): There is no evidence of carbon dioxide-related mortalities of juvenile or adult mussels “even under conditions that far exceed the worst-case scenarios for future ocean acidification.”

Skeptical blogs continually disseminate such findings to policymakers and the public.

Policy Failures

Last week the European Parliament refused to stop the EU carbon market from crashing. This debacle, a setback to all who tout Europe as a model for U.S. climate and energy policy, was all but inevitable.

For months EU policymakers had been groping for the carbon price sweet spot. Were carbon prices too low or too high? The answer: Both! Prices were so low they failed to incentivize hoped-for technology innovation but so high EU governments had to establish a “carbon compensation fund” to keep domestic manufacturers from off-shoring their operations. The EU Parliament finally decided to just let carbon prices crater, embracing in deed if not in speech the ‘carbon price’ advocated by G.W. Bush. Ha!

Fiscal realities have also forced EU governments to scale back green energy subsidies. USA Today reported last month: “European governments have now realized this growth – which saw consumers footing the bill for investors’ soaring profit margins – was out of control: The UK and Czech Republic have already cut their subsidies in half, while Italy imposed a cap on new renewable energy providers. Germany cut subsidies by up to 30% and announced a major overhaul of the program Thursday.”

For years the U.S. wind energy industry has been saying it is on the verge of being competitive with coal or gas. Yet President Obama’s Budget proposes to make the renewable energy production tax credit “permanent.” That is a tacit confession wind and solar will never be competitive. With the nation $16.8 trillion in debt, the President’s $23 billion initiative is unlikely to gather much momentum.

The growing list of Stimu-Losers also undermines congressional support for green venture socialism. Besides Solyndra, failed or troubled recipients of DOE loans or guarantees include Beacon Power, Evergreen Solar, Range Fuels, Amonix, A123 Systems, Nevada Geothermal Power, Abound Solar, and, most recently, Fisker Automotive. According to a Privco report, Fisker lost over $1.3 billion in private and taxpayer capital, spending $660,000 for each $103,000 vehicle it produced before firing three-quarters of its employees.

Members of Congress have even begun to reconsider and challenge the once popular Renewable Fuel Standard (RFS) program. This 15-year central plan increases consumers’ pain at the pump, expands aquatic dead zones, makes food less affordable to the world’s poorest people, plows up millions of acres of wildlife habitat, and puts at least as much carbon in the atmosphere as the gasoline it displaces. Although the RFS still has defenders in Congress, there is no momentum on the Hill to augment the RFS with flex-fuel vehicle mandates or subsidized infrastructure.

Can’t Get There from Here

Green activists blame “oil-fueled, coal-powered” legislators for energy gridlock. The real reason for policy stalemate is that nobody knows how to sustain a modern economy with zero-carbon energy.

The Breakthrough Institute developed this point in its Death of Cap-and-Trade blog posts. Because affordable energy is vital to prosperity and much of the world is energy poor, it would be economically ruinous and, thus, politically suicidal to make people abandon fossil fuels before cheaper alternative energies are available. That, however, is exactly what “comprehensive energy and climate legislation” aimed to do.

As the Breakthrough folks argue, if you’re worried about climate change, then your chief policy objective should be to make alternative energy cheaper than fossil energy. Instead, the green movement attempted to make fossil energy more costly than alternative energy, or to simply mandate the switch to alternative energy regardless of cost. Al Gore’s call in 2008 to “re-power America” with zero-carbon energy within 10 years epitomizes this folly. More “moderate” variants would only do less harm, less rapidly.

EPA Is Legislating Climate and Energy Policy

Lastly, energy is on the legislative back burner because the EPA is already enacting the green movement’s agenda via administrative action. Why risk voter ire over controversial climate policies when it is easier to sit back and watch the EPA take the heat or implement regulations few people outside of Washington even know about?

This situation is likely to persist as long as divided government persists. Many Democrats are content to let the EPA flout the separation of powers and implement policies the people’s representatives would reject if introduced as legislation and put to a vote. Many Republicans fear to challenge the EPA, knowing how difficult it is to overcome a presidential veto and how easily efforts to rein-in the agency can be spun as attacks on science and children’s health.