Earlier this month E&E News ran a story by Jean Chemnick on Senator Mark Begich (D-Alaska) and the steering committee he chaired on climate change. Begich denied that he was a supporter of a carbon tax (a dubious claim, given his voting record) and then had the audacity to suggest that he embraced government mandates and subsidies in the energy sector in order to save taxpayers money. As we’ll see, Begich has not yet begun to save taxpayers money—we’ll suggest some better ideas.
Begich In His Own Words
To set the stage, we’ll quote from the Chemnick’s article entitled, “Begich, targeted by conservative ads on carbon tax, chairs steering committee briefing on global warming”:
Begich said he prefers to focus on the economic side of climate change. He said he was proud, for example, that Anchorage had mounted the most ambitious LED conversion project for streetlights of any city in the United States while he was mayor and that city found a way to sell captured methane from the city dump to the U.S. military as a fuel source. He also pointed to the state’s ambitious renewable energy standard for utilities.
“The end result is you will reduce CO2 by doing this,” he said. “A lot of people say, ‘Let’s focus on the environment.’ I say that’s great, that’s the end product. Right now, I like to focus on how to save taxpayers money, because when you do that it’s in the interest of the taxpayer, and the end result is you actually reduce CO2 without having to focus on the environment.”
Notice the rhetorical move. Begich and other supporters of more government involvement in energy know that the American public overwhelmingly does not want a carbon tax (see question #15 in this recent survey) or any other massively expensive scheme that officials assure us will avert even worse climate change damages. For a while, when asked about the costs of fighting climate change, the smug answer was, “Yes but we can’t afford the cost of doing nothing.”
Yet as Begich’s hemming and hawing show, the new way to justify inefficient regulations, mandates, subsidies, and taxes on energy is to tell taxpayers it makes sense on fiscal grounds. Yeah, sure it does—and I’m sure Begich also has an orange grove in Alaska to sell us.
News Flash: Forcing Utilities to Use Expensive Energy Is…Expensive
We are a bit confused by Begich’s reference (quoted in the article above) to “the state’s ambitious renewable energy standard for utilities,” since according to the Department of Energy, Alaska doesn’t have a renewable portfolio standard (RPS) the way some other states do. Perhaps Begich was referring to the broader category of government-facilitated financial incentives for renewables, perhaps he was simply mistaken, or perhaps the reporter misunderstood his actual remarks (since it wasn’t a direct quote). Whatever the case, a renewable energy standard is a terrible idea for anyone interested in saving his constituents money.
By definition, a renewable energy standard forces utilities to produce more electricity from renewable sources than they otherwise would have chosen. Since the operators of utilities are in business to make money, forcing them to use an arbitrary amount of “renewable” energy makes them less profitable or they pass the costs on to the consumers or both. The government doesn’t need to force businesses to do something that makes financial sense.
The following table shows the levelized costs of various electricity sources:
The full explanation of the above graphic is available here, but in a nutshell: The government itself estimates that the full lifecycle cost (including the capital of new plant construction) of producing electricity with natural gas will be far lower than any other technology, even if we look ahead to the year 2018. Moreover, the above chart artificially penalizes coal technology with an implicit $15/ton carbon tax, thereby making it look more expensive relative to the other options. (Also keep in mind that the “non-dispatchable power” such as wind and solar can at best supplement the dispatchable sources, since the wind doesn’t always blow and the sun doesn’t always shine.)
To repeat, the government isn’t doing utilities any favors by forcing them to run their business in a particular way. And consumers will end up paying. If Begich thinks government edicts on Alaskans are a good idea because of the threat of climate change, he can try to make that case. But he should stop kidding his constituents when he argues that government constraints are somehow saving them money.
Better Ways Begich Can Save Taxpayers Money
In contrast to Begich’s bogus ideas, here are some real ways to save taxpayers money:
(1) Repeal renewables energy mandates and stand against attempts to federalize this policy, including backdoor FERC regulations. As explained above, this would allow utilities to operate in the most profitable manner, lowering energy prices for consumers.
(2) Repeal the federal gasoline tax. According to the EIA, in July 2013 combined federal and state taxes on average accounted for 12 percent of the price of gasoline at the pump. The federal tax on gasoline is currently 18.4 cents per gallon. Economists argue over how much of the gas tax is borne by motorists versus industry, but everybody realizes that a tax on gasoline makes gasoline more expensive.
(3) Promise to never enact a carbon tax, cap and trade scheme, or other form of “price on carbon.” This speaks for itself. You don’t save taxpayers money by hitting them with a carbon tax, even if you pretend it will only hurt companies who miraculously won’t pass it on.
(4) Eliminate the Department of Energy’s support of boondoggle “alternative energy” ventures. Here’s a Hall of Shame of “green” companies that went belly-up on the taxpayer’s dime, including Solyndra and Beacon Power. Here is a more comprehensive list of federal subsidies (explicit grants, loans and loan guarantees, and special tax treatment) for various energy types.
(5) Allow companies to develop domestic U.S. energy. According to a study by Joseph Mason, the development of offshore resources could yield an additional $86 billion per year in federal revenue. Alaska’s own resources have been in a deep freeze because of federal policies, including the offshore, ANWR and the National Petroleum Reserve, Alaska, and President Obama has done nothing to unfreeze them. A little more heavy lifting and a little less blame shifting would go a long way to help Alaska.
(6) Support the spread of the policies in states like Texas and North Dakota. These states have allowed the hydraulic fracturing revolution to flourish and expand those policies to federal lands and around the world. If the hydraulic fracturing revolution spread around the world, energy prices would go down.
The above list is by no means exhaustive, but it’s a good start. Senator Begich says he is first and foremost interested in saving taxpayers money with his energy policies. If that’s the case, he and his staff should consider our proposals carefully, as they would help taxpayers far more than the measures that Begich has supported while in office.