July 25, 2003 | Executive Memorandum on Energy and Environment
Over the past decade, growth in the nation's demand for energy has outpaced production. The U.S. Department of Energy's Energy Information Administration (EIA) projects that by 2025, consumption will increase by 43 percent and production by only 23 percent.
As the Senate resumes floor debate on a comprehensive energy bill (S. 14), its members have the opportunity to adopt responsible policies that enhance domestic energy supplies. They also, however, could pander to special-interest groups and pass measures that exacerbate the gap between supply and demand, aggravate an already sluggish economy, and jeopardize national security.
S. 14 includes helpful provisions that would boost domestic energy supplies, such as sensible improvements in the hydropower licensing process and repeal of the antiquated Public Utility Holding Company Act. Other measures, however, would interfere with energy markets, reward special-interest groups, and prolong the existing imbalance between supply and demand.
When a project is deemed economic by the marketplace, there is no need for any special government incentive or subsidy. Conversely, if market conditions do not support a project, the financial risks should not be shifted to taxpayers.
The Senate approved a floor amendment that would nearly triple the amount of ethanol in the nation's fuel supply by mandating that refiners use 5 billion gallons of ethanol by 2012. Disguised as a bill to help struggling farmers and enhance environmental quality, this mandate is nothing more than a "corporate welfare" scheme that will enrich a few large agribusinesses and burden consumers with a hidden tax. The Senate should remove this misguided taxpayer subsidy.
Despite this dismal record of market penetration, some Senators want to force retail electricity suppliers to generate a specified portion of their production from new renewable energy resources. Families and businesses need reliable--not intermittent--sources of electricity. The marketplace--not big government mandates--should decide the most efficient way to generate electricity.
One expected amendment would force U.S. electricity, transportation, industrial and commercial sectors to drastically reduce their greenhouse gas emissions. This proposal is nothing more than a stealth energy tax on the use of fossil fuels. It would raise the price of energy for consumers, cause job losses, and undermine the nation's economic and national security.
Another amendment may create a so-called voluntary registry for greenhouse gas emissions. It would become mandatory, however, after five years under an automatic trigger provision. A mandatory program would be particularly burdensome for small businesses, which would be required to record and report their emissions or face stiff penalties. Moreover, this provision is redundant. A voluntary greenhouse gas program already exists and is being improved as ordered by the President.
Abundant, reliable, and affordable energy is essential for a strong economy and national security. Instead of passing more market-distorting mandates, Congress should enhance domestic energy supplies by removing impediments to oil and natural gas production on federal lands, including the Arctic National Wildlife Refuge (ANWR), streamline bureaucratic regulations, and let the marketplace--not political interference--determine the nation's energy winners and losers.
Charli E. Coon, J.D. , is Senior Policy Analyst for Energy and Environment in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.