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  • Climate and Rent-Seeking

    United Nations Climate Change Conference

    Data show 2009 was a record year for lobbying on energy issues.  1747 clients (firms and groups) hired lobbyists to work in the area of energy and nuclear power. This is a stunning 93 percent increase from 2006.

    This increase may be stunning, but it isn’t surprising.  With literally trillions of dollars put into play by various cap-and-trade bills over the last three years, it would have been surprising if lobbying hadn’t grown by leaps and bounds.

    Though initially offered as legislation to fight global-warming, the justifications for cap and trade followed the polls (from global warming to climate change to energy security to economic stimulus to green jobs to who knows what’s next) and the bills’ provisions followed the money.  Effectively a huge energy tax, early proposals kept the trillions in new taxes for federal spending.  In the end, the only bill to pass either house of Congress, the Waxman-Markey bill, gave virtually all of the revenue away to a grab bag of special interests.

    This evolution perfectly fits the theory of Professors Gordon Tullock and Nobel Laureate James Buchanan who developed public choice theory—a sub discipline of economics that investigates the self-interested use of the political process.  Public choice theory predicts the regulatory process will be bent toward the goals of private enrichment as politicians and rent-seekers (a term coined by Anne Krueger in her 1974 analysis of this behavior in India and Turkey) do what economists assume all business owners and consumers do—look out for themselves.

    So legislation and regulations that promise billions in taxes for some energy companies (and their customers) and offer billions in benefits to others will get both sides excited and generate the demand for lobbyists that we have now seen.

    For instance, the Climate Action Partnership strongly supports cap-and-trade legislation, especially if its members get big chunks of the tax revenue.  Among the founding corporate members, Duke Energy, BP, Honeywell International, NRG Energy, Shell Oil, Dow Chemical, and Alcoa rank in the top 50 most active clients lobbying in the energy area.

    As current and proposed policies offer billions in subsidies to both wind and nuclear power, it’s another dog-bites-man story when we find representatives of the wind and nuclear power industries in the top 50 as well.  Of course those expecting big losses from the proposed regulations and taxes are lobbying hard to stave them off.  So coal and refining interests are also well represented in the top 50.

    Stricter rules on lobbying can change the form the lobbying takes (indeed the numbers above only reflect official use of registered lobbyists), but reducing government control of the economy reduces the root cause of the lobbying and is the one solution to controlling the growth of rent-seekers and their mouthpieces on K Street.

    Posted in Energy [slideshow_deploy]

    4 Responses to Climate and Rent-Seeking

    1. Anders says:

      Let's consider interest groups for a second. The first amendment declares them a form of free speech. Now let's think of capitalism. Capitalism promotes competition. Lastly, lets consider social darwinism – Sink or swim. If you don't have what the people are looking for, you sink. Why would any company spend thousands of dollars on advocacy? Because it's what the american people desire and these companies are trying to swim.

      Why not invest in alternative fuels and power sources? Why not insure the health of our environment? Why not insure the health of our economy? Why not insure the health of our nation? Gasoline, no matter how great one believes it to be, is not a renuable resource and won't be available for eternity. Our planet is our home. Whether you agree in athropogenic climate change or not, it is undeniable that harmful polutents are released into our environment every day and these polutents have had profound effects on many individuals. The America of tommorow will be different from the America of today. As our non-renuable resources become more scarce we will rely on more alternatives. Alternatives ore the future of our economy and they come at a price. Like a rising star, individuals must take a risk and invest in them in order to make them more economical, more efficient, and more advanced. But this investment will yeild great dividends when our economy rides on "green" technology and the petroleum is not in demand. The well being of this nation and any nation rides on the well being of its economy, an economy that fits the times; today, a green economy.

      As a young conservative you may inapropriatly call me liberal. But is that wise? Numbers of young conservative voters are rapidly decreasing. Can you really afford to ignore the young American population? As a conservative of tommorow, I challenge you to consider my thoughts and refuse to ignore them. I don't think the health of our party can afford ignorance.

    2. Robert, Portland says:

      Hansen in his new book suggests a "tax and dividend" approach in which a carbon tax is immediately converted into a check for each citizen. It's a good approach. Cap-and-trade is far from ideal, but focusing on its problems misses the point a little. If you believe the science, carbon emissions have to be reduced to have any hope of maintaining a climate like the one in which human civilization developed. If you believe this is so, the question is: what is the best carbon-reducing deal that can be passed through Congress right now?

      On the other hand, if you are a denialist, grasping at straws to try a cobble together some sort of mental defense for the overwhelming physical evidence of global warming and the irrefutable scientific case that it is human-driven, then you are likely going to oppose any legislation to reduce GHGs, regardless, even if, unlike everything else Congress does, it is snow-pure without a single lobby in sight.

    3. HappyChappy, Salem, says:

      You ask “why not invest in alternative fuels and power sources?”. This begs the question. Lets agree up front that we need alternatives to fossil fuel and we all want viable alternatives. We have a window of a few years or a few decades of cheap fossil fuels which allows us to develop a viable alternative. If we fail then civilization might fail. We cannot support 6.5 billion people as hunter gatherers, we must have energy sources that are more useful then campfires. The problem with most of those who have a liberal or left leaning view is they believe the government can do it. It should be clear to all that what the government does best is “tax, tax, tax and spend, spend, spend”. What they are incapable of doing is inventing an alternative energy or supporting those who would invent it. A classic example of this is our current ethanol from corn program. The evidence shows that it takes 130% energy (from fossil fuels) into the process for the 100% energy we get out. This has been known for years and every year the government increases the subsidy to the ethanol industry while the states continue to increase the demand by mandating ethanol in gasoline. Will this wasteful farce of an “alternative” ever go away? The simple answer is no! Not as long as the government continues to subsidize it. Worse, the fact that the program exists prevents a viable alternative from being discovered. In fact if today some genius discovered a cheap and effective additive to gasoline to reduce pollution and decrease the need for oil the ethanol industry and congress would fight it and probably legislate it out of existence. The problem IS the government! The problem IS the subsidy. By definition a viable alternative energy source would not require a subsidy. None of our current crop of alternatives are viable. Wind power is the most promising and it costs 4-10 times what a fossil fuel generation plant would cost. Photo voltaic is the most well known alternative and it costs more to purchase the system then it will ever return in the form of generated electricity. In fact it requires more energy to build and install all the components of a PV system then it will ever produce. In other words it isn’t viable. However it is subsidized, it is anointed by government and special interests.

      If we want viable alternatives then establish a system that allows new alternatives to compete and be judged by neutral experts and scientists not politicians or lobbyists. Set up a standard with goals and requirements that must be meet. Provide a cash prize for the winner as an incentive but no subsidy. Let the industry and individuals choose from those alternatives that can pass the test. Do not allow the federal or state government to “subsidize” or otherwise choose the winners.

      Let me add that I have confidence and hope that we can meet this challenge. Let me also say that the biggest opportunity for us to meet the challenge will be in the area of conservation. In the U.S. we could probably reduce our energy usage by 50% without any serious harm to our economy and lifestyle. It is ironic but because we use so much energy and because we have never really tried to implement conservation on a massive scale that any conservation we implement will save a lot of energy. It is a rich and untapped resource. Additionally there are 100 or more small things that any individual can do to reduce their energy use. What we all need is good honest information not subsidies.

    4. Pingback: Global Warming: What’s Credibility Got to Do with It? | The Foundry: Conservative Policy News.

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