It’s highly unlikely that we’re going to see any large energy bills like a cap and trade or renewable electricity standard passed during the lame duck session, but that isn’t stopping Senator Harry Reid (D–NV) from moving forward with bad energy policy.
Undeterred by an American electorate that shouted clearly that it was done with Washington-centric, special interest politics, the majority leader filed procedural motions to vote on S. 3815, the “Promoting Natural Gas and Electric Vehicles Act of 2010.” The bill is laden with handouts to promote vehicles powered by natural gas and electric. And to pay for this corporate welfare, the bill would call for an increase to the Oil Spill Liability Trust Fund tax from $.08 per barrel to $0.21 per barrel.
This means that everyday Americans would be paying more at the pump to subsidize industries that Washington has deemed politically correct. S. 3815 “would spend $4.5 billion over the next ten years on tax rebates for buyers of natural gas vehicles and subsidies for manufacturers of the vehicles. It also authorizes $1.5 billion over the next ten years for research and development effort related to plug-in hybrid electric vehicles.”
The bill is symbolic of everything that is wrong with Washington when it comes to energy policy. The government spends money on proven technologies even though these decisions would be better left for the private sector. When the government selects political winners, it’s usually a good indicator that the technology or energy source is a market loser. After all, if the venture was a profitable one, it wouldn’t need privileged treatment from the government.
A study from J. D. Power and Associates says there will be very little demand for electric vehicles over the next decade, even with lucrative federal handouts. But that’s not the only one. There are many studies pessimistic about the environmental and economic purposes of the electric vehicle, including ones by Deloitte Touche, Boston Consulting Group, Roland Berger Strategy Consultants, Professor Henry Lee of Harvard’s Belfer Center for Science and International Affairs, and the Massachusetts Institute of Technology’s Energy Initiative.
Both natural gas vehicles and electric vehicles may be a part of America’s vehicle fleet, but Congress should not wastefully spend money to prematurely rush them into the marketplace. The vehicles we drive today will most likely look very different from the ones we drive 20 years from now and may well run on alternative fuels as producers offer new products to meet consumers’ needs. But the most productive and efficient way to achieve these changes is not through a predetermined evolution created by bureaucrats and central planners. Instead, Washington should step aside and allow the marketplace to guide innovation and technological advancement. As economist Friedrich Hayek said in The Fatal Conceit: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
To pay for the government’s program, Reid insists on using the BP oil spill to pay for it, and—in what has become the most overused phrase in Washington—not let a crisis to go to waste.
If Congress wants to address issues surrounding the oil spill, instead of increasing taxes, it should implement actual reforms that would fix many of the problems that became apparent after the accident. For example, Congress could fix the offshore oil and gas liability cap. Instead of lifting the cap, raising it to another arbitrary number, or increasing the per-barrel tax, Congress should establish a liability and claims process that fully assigns risk of offshore oil and gas operations, allows victims to be fully compensated, and protects companies from frivolous lawsuits.
A better way to promote natural gas in the U.S. is to open off-limit areas for exploration and production and ensure that the Environmental Protection Agency (EPA) does not create new rules and regulations to crack down on hydraulic fracturing, a process to extract natural gas. Hydraulic fracturing has been safely done for decades, and former EPA Administrator Carol Browner wrote in defense of “fracking” 15 years ago:
There is no evidence that the hydraulic fracturing at issue has resulted in any contamination or endangerment of underground sources of drinking water (USDW). … Moreover, given the horizontal and vertical distance between the drinking water well and the closest methane production wells, the possibility of contamination of endangerment of USDWs in the area is extremely remote.
What’s worse, Reid’s lame duck energy policy could be a preview of the smaller energy bills mentioned by President Obama after the election on which Republicans and Democrats could agree. These are not conservative policy ideas, nor are they rooted in the free market. These policies benefit a concentrated interest group and spread the costs to the American consumer or taxpayer—depending on how the government chooses to fund its projects. Unfortunately, in many instances, it’s both.
Nicolas Loris is a Research Assistant at The Heritage Foundation’s Roe Institute for Economic Policy Studies. Loris studies energy, environment and regulation issues such as the economic impacts of climate change legislation, a free market approach to nuclear energy and the effects of environmental policy on energy prices and the economy.
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