Competitive Enterprise Institute | 1899 L ST NW Floor 12, Washington, DC 20036 | Phone: 202-331-1010 | Fax: 202-331-0640
Speaker Pelosi says that HR 3221, the New Direction for Energy Independence, National Security and Consumer Protection Act "puts us on a path towards energy independence, strengthens national security, grows our economy and creates new jobs, lowers energy prices and begins to address global warming." It will actually do none of these in any meaningful sense. It is a new direction, certainly, but it’s the wrong direction. This is an anti-energy bill.
How does the bill propose to move us towards energy independence? It purports to do this by expanding production of "homegrown fuels such as cellulosic ethanol and biodeisel" and by incentivizing the development of plug-in hybrid technology. Both of these provisions are gambles with the future. Cellulosic ethanol is an untried technology, with great potential, but as yet non-existent in a commercially viable form and with serious logistical problems involved that will require massive amounts of transportation fuel themselves. Plug-in hybrids again show promise, but current battery technology is nowhere near ready to make the plug-in hybrid the drivetrain of an all-purpose vehicle fleet meeting the demands of American consumers for the sort of autos they want to buy.
Moreover, cellulosic ethanol comes with serious environmental problems of its own. As even Rolling Stone  admitted this month:
[O]il-industry engineer Robert Rapier, who has spent years studying cellulosic ethanol, says that the difference between ethanol from corn and ethanol from cellulose is "like the difference between traveling to the moon and traveling to Mars." And even if the engineering hurdles can be overcome, there's still the problem of land use: According to Rapier, replacing fifty percent of our current gasoline consumption with cellulosic ethanol would consume thirteen percent of the land in the United States - about seven times the land currently utilized for corn production.
Expanded cellulosic ethanol production, therefore, would devastate wilderness land in the United States, severly harming biodiversity.
Meanwhile, the way the bill proposes to pay for investment in these fledgling technologies will actually harm our energy security. By imposing new taxes on existing American energy firms, the bill will actually discourage new domestic energy production and discourage new investment in refinery capacity. This will assuredly raise, not lower energy prices.
In turn, the new taxes will in fact drive American oil and gas companies abroad, and they will take American jobs with them. Furthermore, the measures will actually make domestic energy investment more expensive and less competitive in international markets. This will further degrade America’s existing energy infrastructure and have the perverse effect of making the nation more, not less dependent on foreign oil.
The subsidies to technology development that the bill provides will probably create some new jobs in those industries but they are unlikely to match the number of jobs lost from the outsourcing the new rules will force on companies and those lost from higher day-to-day expenses when energy prices rise. Trumpeting the new jobs is like banning the wheel and celebrating the new jobs for blacksmiths and livery companies.
What would actually help, and what would be a genuinely new direction, is to allow exploration of new domestic energy sources in Alaska, the Gulf of Mexico and the Outer Continental Shelf. Bringing these new sources online would lower energy prices and significantly reduce our need for foreign oil. Yet the bill explicitly rejects this approach.
As for global warming, all economists and most environmentalists agree that the best way to tackle emissions is to raise energy prices, not lower them. If the bill does lower energy prices, it will encourage more use of energy, and therefore more greenhouse gases. The bill is therefore internally self-contradictory.
So how does this bill "begin to tackle global warming"? It has steered clear of new fuel economy regulations – although some amendments have been proposed. It doesn’t require utilities to purchase electricity from renewable sources – although it does include a training program for "good green jobs." It merely "encourages" the use of mass transit – and we know how well those programs have worked in the past. It doesn’t impose a carbon tax. In short it does nothing that most economists suggest would be necessary to reduce emissions.
Except in one area. It will require the Federal Government to be emissions-free by 2050. That will only be achieved by increasing the cost of government, something that voters are unlikely to take kindly to, or by reducing the size of the government, which might be the silver lining to this otherwise cloudy bill.
The bill should be retitled the Wrong Direction Towards Energy Insecurity, Endangering Species and Consumer Extortion Act. At least that might satisfy the truth-in-advertising laws.