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Clean Energy Standard: Another Energy Tax in Disguise

Posted By David Kreutzer, Ph.D. On March 7, 2012 @ 3:30 pm In Featured | Comments Disabled

When are we going to be honest about the impact of “clean energy” standards, renewable energy standards, cap and trade, and all the other policies to cut energy use under the guise of helping future generations? These policies are not things we do for our grandchildren; they are things we would do to them. The costs are hugely back loaded onto future generations, while the front-end costs are often fictionalized with unrealistic assumptions about carbon-reduction strategies.

On March 1, Senator Jeff Bingaman (D–NM) proposed a national Clean Energy Standard (CES). Clean Energy Standards are modifications of the Renewable Energy Standards that have been proposed before and have been enacted by several states and regions. The primary modifications allow nuclear power (or some of it) to count as clean energy and give partial credit for other sources such as natural gas. (Since carbon dioxide is odorless, invisible, and non-toxic, it is Orwellian doublethink to label CO2 “dirty.”) The standard mandates minimum percentages of electric power that must be generated from clean energy sources.

One of the little-known facts about cap-and-trade bills is that 85 percent or more of the carbon reductions would come from the electric power industry alone. So, though a CES may cover only the power industry, it can have economic costs that are almost as big as cap and trade.

Last year, Senator Bingaman requested an Energy Information Administration (EIA) analysis of several clean energy proposals. As with the low-ball estimates of costs done for the cap-and-trade bills, the analyses of Bingaman’s clean energy standards assume huge increases in new nuclear capacity and commercialization of carbon capture and storage.

These assumptions, however, are wildly unrealistic. Though the technical capacity exists for expanding nuclear capacity over the next two or three decades, the regulatory and waste disposal hurdles that stand in the way of significant capacity expansion are not addressed in the Bingaman bill. Proponents of carbon capture and storage (CCS) can’t point to a single commercial-scale project. Full, wide-scale deployment of CCS—and the possibly more problematic disposal of liquefied CO2—is still a pipe dream.

Different analyses of renewable energy standards (RES) had widely varying estimates of economic impact. An analysis of one bill by the EIA projected electricity price increases of only 3 percent. On the other hand, a Heritage Foundation analysis of a generic RES projected increases of 36 percent or more by 2035.

Last month, a study by Robert Bryce of the Manhattan Institute looked at the current prices charged for electricity across states. He found that states with renewable standards had residential electricity rates that are already more than 30 percent higher than states without a renewable standard. The impact is clearer when comparing coal-dependent states with a renewable standard to coal-dependent states without a renewable standard. Those with a renewable mandate saw their residential electricity prices rise at double the rate of coal-dependent states without the mandate between 2001 and 2010. A maximum price impact of 3 percent does not seem plausible given these facts.

What today’s clean energy standards have going for them that earlier plans to restrict carbon dioxide did not is the currently low price of natural gas. If—in contrast to our experience over the past several decades—natural gas prices remain low and stable, the big costs of Bingaman’s CES would not fully come into play until after the end of the EIA analysis time period (2035), when the partial clean energy credit for natural gas would not be enough to meet the tighter requirements as the standard ratchets down. What will our children and grandchildren do then? If they are smart, they would consider repealing any energy-killing mandates we dumped on them.


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