Standard Still A Production Quota

Source:  http://energy.nationaljournal.com/2010/02/should-congress-embrace-a-clea.php?rss=1#1413306

By Marlo Lewis

Sen. Lindsey Graham’s Clean Energy Act is, like cap-and-trade, calculated to raise energy prices and expand government control over the economy for the benefit of special interests.

The public – and therefore the Senate – isn’t buying cap-and-trade, and no informed adult really believes we can “repower” America with wind turbines and solar panels. So Sen. Graham has come up with a slick alternative to both cap-and-trade and a national renewable electricity standard (RES) – a national “clean energy” standard (CES).

RES advocates claim they want to reduce greenhouse gas emissions and dependence on Mideast oil, yet won’t allow nuclear power and coal with carbon capture and storage (CCS) to contribute to those goals. Graham’s CES avoids this rank inconsistency. (Or it does …

Sen. Lindsey Graham’s Clean Energy Act is, like cap-and-trade, calculated to raise energy prices and expand government control over the economy for the benefit of special interests.

The public – and therefore the Senate – isn’t buying cap-and-trade, and no informed adult really believes we can “repower” America with wind turbines and solar panels. So Sen. Graham has come up with a slick alternative to both cap-and-trade and a national renewable electricity standard (RES) – a national “clean energy” standard (CES).

RES advocates claim they want to reduce greenhouse gas emissions and dependence on Mideast oil, yet won’t allow nuclear power and coal with carbon capture and storage (CCS) to contribute to those goals. Graham’s CES avoids this rank inconsistency. (Or it does in principle – it’s anybody’s guess whether in practice any new nuclear facility would qualify as “qualified nuclear,” or if CCS ever becomes economical.)

Nonetheless, Graham’s proposal does not deserve even one cheer from free marketers. A CES is still a Soviet-style production quota – an attempt to decree what percentage of America’s energy comes from what kinds of sources. And Graham proposes to fix these percentages not for the duration of a mere five-year plan, but for the next 40 years! For sheer hubris, that clobbers the ethanol mandate, which establishes production quota for 15-years.

Graham professes to believe that we cannot “clean the air” until we “price carbon,” but because cap-and-trade has hit a wall in the Senate, he is proposing a CES as a “bipartisan” alternative. However, the notion that we cannot clean the air without pricing carbon is bunk.

History is clear on this point. U.S. air quality has improved, decade by decade, for almost as long as we’ve been measuring it. Particulate matter, for example, has been dropping since at least the late 1950s. Between 1980 and 2008, nationwide air pollution levels decreased 79% for carbon monoxide, 25% for ozone, 92% for lead, 46% for nitrogen dioxide, and 71% for sulfur dioxide. Between 1990 and 2008, air pollution levels decreased 31% for coarse particulates (PM10) and 20% for PM2.5. This progress will continue under regulations already on the books or planned, as motor vehicle fleets turn over to cleaner vehicles and new capital stock replaces old.

Graham claims his main concern is not saving polar bears but saving American jobs. “Every day we wait in this nation [to price carbon], China is going to eat our lunch,” he explained at a February 3 conference (Business Advocacy Day for Jobs, Climate, & New Energy Leadership) in Washington, D.C.

The Senator is mistaken on two counts. First, “clean tech” industries that cannot compete without policy privileges are now and very likely will remain less competitive than the industries Graham would have them replace. That is a recipe for reducing wealth- and job-creation. In Spain, subsidies for “green energy” destroy about 2.2 jobs for every single job created. Similarly, Germany’s feeder tariff system promoting wind and solar power has produced net job losses.

Like many conservatives, Graham is a fan of nuclear power, but corporate welfare, whether right wing or left wing, benefits special interests at the expense of the overall economy. Federal nuclear subsidies have totaled $178 billion during 1947-1999, according to economist Doug Koplow. Yet as Cato Institute energy analyst Jerry Taylor points out, despite this largesse, no new nuclear plants have been built in 30 years. Why? Because the economic risks are too great:

“In short, even during the go-go days prior to the September 2008 crash – a time when Wall Street was allegedly throwing around money left and right to all sorts of dubious borrowers – the banks that stand accused of recklessly endangering their shareholders on other fronts were telling utility companies that they would not loan them anything for new nuclear power plant construction unless the feds unconditionally guaranteed every last penny of those loans. That’s how risky market actors think it is to build nuclear power plants.”

Piling mandate on top of subsidy would feed corporate welfare dependency, not ‘incentivize and reward the future,’ as Graham supposes.

Second, the notion that China will “eat our lunch” unless we handicap the most competitive sources of U.S. electric generation is deeply confused. China, after all, does not put a price on carbon! Indeed, one reason China has become a leading manufacturer of solar voltaic panels is that Chinese energy prices are low. Putting a price on carbon would jeopardize Chinese manufacturers’ access to abundant, affordable coal-based power (China’s consumption of coal for electric generation is projected to more than double from 2006 to 2030).

Nor is it the case that a nation must produce lots of zero-carbon energy for domestic consumption in order to compete in global “green tech” markets. China has become the world’s largest producer of solar panels, producing about 820 megawatts of PVs in 2007. But, due to their relatively high cost, China in 2007 deployed only about 20 megawatts of PVs domestically, mostly for “remote off-grid applications.”

A final point – enactment of Graham’s bill would not preclude subsequent enactment of a cap-and-trade bill or a more stringent CES. Recall how quickly the ethanol mandate grew between 2005 and 2007 – from 7.5 billion gallons per year by 2012 to 30 billion gallons per year by 2022. Recall also that Al Gore says we need it all – cap-and-trade, renewable energy mandates, tougher energy efficiency standards, and a carbon tax. Enactment of the Graham bill will surely embolden rather than mollify the global warming movement. As we should all know from Captain Hook, feeding the crocodile your hand does not make it less aggressive.

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