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Climate and Rent-Seeking

Posted By David Kreutzer, Ph.D. On February 11, 2010 @ 12:00 pm In Energy | Comments Disabled

United Nations Climate Change Conference [1]

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 [2]. 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.


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URL to article: http://blog.heritage.org/2010/02/11/climate-and-rent-seeking/

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[1] Image: http://www.foundry.org/wp-content/uploads/100211-cop15.jpg

[2] energy and nuclear power: http://www.opensecrets.org/lobby/issuesum.php?year=2009&lname=Energy+%26+Nuclear+Power&id=

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