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Reject All Energy Mandates: It’s Just Another Subsidy

Posted By Nicolas Loris On December 7, 2010 @ 1:38 pm In Energy | Comments Disabled

Department of Energy [1]

With cap and trade out of the realm of possibilities, Members of Congress have turned their attention to mandating so-called clean energy.

Some Members hoped for a lame duck vote on a renewable electricity standard (RES), which would require that a certain percentage of our nation’s electricity production come from wind, solar, biomass, and other government-picked renewable energies. With that looking less likely, Department of Energy Secretary Steven Chu mentioned a clean energy standard that includes other carbon-free sources of energy as a possible compromise between Democrats and Republicans next year. The Hill reports [2]:

With climate legislation that would price carbon in a deep freeze for now, Chu called for talks about other policies that could help provide a market signal powerful enough to help spur construction of new multibillion dollar reactors.

“I hope we can discuss policies that can do that,” Chu said at a nuclear energy summit hosted by the think tank Third Way and the Idaho National Laboratory. “A clean energy portfolio standard is one example of a potential policy that the administration and Congress should discuss.”

A narrower renewable-electricity standard—which would require utilities to provide growing amounts of power in coming years from wind, solar and other renewables—has long been a pillar of Democratic energy proposals, and White House press secretary Robert Gibbs plugged the idea as recently as last month [3].

But some Republicans—notably Sen. Lindsey Graham (R-S.C.) of late—have floated a wider “clean” standard that would give credit to nuclear energy, coal plants if they trap and store carbon, and perhaps other non-renewable sources. The renewables-only idea faces big hurdles despite a limited amount of GOP buy-in. But giving credit to nuclear power, or coal with carbon capture (a technology not yet commercialized), would in turn face opposition from green groups and some key Democrats.

Chu proposed mandate for utilities to use 25 percent clean energy by 2025 and 50 percent by 2050. While a more flexible clean energy standard is less onerous than a specified renewable one, it’s still a subsidy that carves out a guaranteed share of the market for certain energy industries. The aforementioned signal that Chu speaks of is not a good one. It signals to the government-selected industries that they do not have to worry about lowering costs.

The mandate may reward certain energy producers in the short term but will hurt both producers and consumers in the long run because it eliminates competition, drives prices higher, and encourages government dependence—hence the reason we continually see pushes for extensions of direct subsidies, capital subsidies, mandates, insurance subsidies, and specialized tax credits.

Furthermore, a clean energy standard wouldn’t significantly reduce emissions. The Energy Information Administration estimated that mandating that 25 percent of our energy come from renewables would reduce emissions by only 4.9 percent by 2030. To put this in perspective, the cap-and-trade target was to reduce carbon 80 percent by 2050. To put that number in perspective, climatologist Paul C. Knappenberger [4] says that an 80 percent reduction would moderate temperatures by only hundredths of a degree in 2050 and no more than two-tenths of a degree by the end of the century.

Nor would it improve our energy security. Since electricity comes almost entirely from secure domestic sources and petroleum provides only about 1 percent of our electricity needs, an RES would do almost nothing to decrease our use of foreign energy.

This is not the right direction for America’s energy policy, nor should it be an acceptable alternative to cap and trade or a narrower RES.


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URL to article: http://blog.heritage.org/2010/12/07/reject-all-energy-mandates-it%e2%80%99s-just-another-subsidy/

URLs in this post:

[1] Image: http://www.foundry.org/wp-content/uploads/dept-energy-100201.jpg

[2] reports: http://thehill.com/blogs/e2-wire/677-e2-wire/132355-doe-chief-floats-bipartisan-talks-on-clean-power-standard-that-includes-nuclear

[3] plugged the idea as recently as last month: http://thehill.com/blogs/e2-wire/677-e2-wire/127741-gibbs-plugs-renewable-electricity-standard

[4] climatologist Paul C. Knappenberger: http://www.masterresource.org/2009/05/part-i-a-climate-analysis-of-the-waxman-markey-climate-bill%e2%80%94the-impacts-of-us-actions-alone/

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