As we enter two more years of divided government, Republicans now control both chambers of Congress and President Obama may have set a record for largest number of veto threats in a State of the Union speech. So what can the new GOP majority actually achieve? On energy policy, a lot of good -- or rather, it can stop a lot of bad.
As in medicine, the cardinal rule of responsible politics is “First, do no harm.” And in Washington today, there’s plenty of potential damage to avoid. To that end, Congress should use its Congressional Review Act authority to overturn harmful regulations, and its power of the purse to defund the development, implementation, and enforcement of regulations that exceed agencies’ statutory authority or impose costs out of all proportion to their alleged benefits.
Sound energy policy should follow a core premise: Affordable energy is a blessing. It puts superhuman power at the beck and call of ordinary people. It is the most basic reason the average person today lives longer and healthier, travels farther and faster in greater comfort and safety, and has greater access to information than the privileged elites of former times.
In Free to Prosper: A Pro-Growth Agenda for the 114th Congress, my colleagues and I at the Competitive Enterprise Institute set forth numerous options to limit harmful energy regulation.
Carbon-based fuels -- coal, oil, and natural gas -- are the world’s dominant energy sources because, in most places, they beat the alternatives in cost, performance, and practicality. They provide 82 percent of U.S. energy and are projected to supply 80 percent of world energy through 2040. While that big picture may change someday, for the foreseeable future, safeguarding affordable energy means fending off regulations and taxes meant to discourage carbon energy production.
To keep American energy affordable, pro-growth lawmakers must put the kibosh on the following policy developments.
First, Congress should defund or overturn any rule whose supposed benefits are based on Social Cost of Carbon (SCC) analysis. Quantifying carbon’s “social cost”—the damage supposedly caused by an incremental ton of carbon dioxide (CO2) emissions—sounds like an objective and scientific endeavor. In fact, it is an impossibility, as said figure is unknowable. Analysts at various regulatory agencies “guesstimate” SCC values via computer simulations that combine speculative climatological models with speculative economic scenarios.
The potential for mischief is vast. By fiddling with non-validated inputs, SCC analysts can make renewable energy look like a bargain at any price and carbon fuels look unaffordable no matter how cheap. The higher the “official” SCC estimate, the bigger the apparent benefit of carbon-suppressing taxes and regulations.
Second, Congress should reject all carbon tax legislation. Although billed as a “free market” policy, a carbon tax is actually a market-rigging policy designed to handicap fossil fuels – our most plentiful source of affordable, reliable energy.
Some economists advocate a “revenue-neutral” carbon tax that offsets other taxes dollar for dollar. But it is delusional to believe Washington’s high rollers would enact a new tax they couldn’t spend on pork and entitlements.
Even a revenue-neutral carbon tax would be economically harmful. The base for a carbon tax—a set of particular commodities or industries on which it is levied—is narrower than the base for retail sales, income, and labor taxes. The smaller the base, the more a tax adversely affects employment and distorts investment.
And any supposed benefits from a carbon tax would be illusory, existing only in the virtual world of SCC analysis.
Finally, Congress should defund the U.S. Environmental Protection Agency’s (EPA’s) Clean Power Plan (CPP), which would impose CO2 emission caps on the electric power sectors of 49 states. The CPP is the centerpiece of Obama’s domestic climate policy agenda and the linchpin of the administration’s bargaining position in negotiations over a successor treaty to the expired Kyoto Protocol.
The CPP is unlawful and as liberal legal scholar Lawrence Tribe recently argued, unconstitutional, as it brazenly flouts the separation of powers. Congress never authorized the EPA to require states to modify their laws and regulations regarding renewable energy, electric grid management, energy-efficiency standards, or consumer conservation incentives.
If the 114th Congress prevents these harmful precedents from being set in the next two years, the prospects for America’s energy entrepreneurs, investors, and consumers should be much brighter in 2016.
Marlo Lewis, Ph.D. is a Senior Fellow at the Competitive Enterprise Institute.