Robust Economy Needs Affordable Energy

Posted on Fri 10/29/2010 by

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By David Kreutzer, Ph.D.

Proposition 23 seeks to put some of California’s more egregious energy regulations on hold—at least until the California economy recovers. Current law will force consumers to switch to energy sources that can be four or more times as expensive as conventional energy, driving energy prices up, employers out, and consumers crazy. The current rules make especially little sense in the current economic environment.

In addition to the standard environmental groups, those financing the opposition to Proposition 23 are mainly financiers who stand to gain from restrictions on conventional energy and billionaires who are far removed from worries over monthly energy bills and losing a job. The problem for the other 37 million Californians is that they do worry about how they can pay higher energy bills and about getting and keeping a job.

The notion that restricting access to affordable energy will make us world leaders in the production of alternative technology doesn’t jibe with past experience. We are world leaders in the consumption of televisions, cell phones, and virtually all other consumer electronics, yet we import the overwhelming majority of these goods. Mandating consumption is different from stimulating domestic production.

As Californians contemplate the energy-regulations-create-jobs theory, they might want to talk to workers in a Winchester, Virginia, light-bulb factory. In anticipation of the regulatory phase-out of conventional light bulbs, GE shut down the factory down. Retrofitting the factory to make the new bulbs was too expensive, so the replacements will come mostly from China.

Of course, there may be some alternative sources of energy that will be cost effective in the future. Just as cars replaced horse-drawn carriages and electric lights replaced kerosene lamps (which replaced whale-oil lamps) and jetliners replaced passenger steam ships, it is likely that some new forms of energy will out-compete the old forms. If so, the developers won’t need mandates to get consumers to use them.

Legislation outlawing ships, oil lamps, and buggies wasn’t required to develop the replacements. It certainly wouldn’t have helped to outlaw those goods before their replacements were ready.

David Kreutzer, Ph.D. writes articles for The Heritage Foundation and is the Senior Policy Analyst in Energy Economics and Climate Change, Center for Data Analysis.

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