Government regulations can burden the economy by shifting costs to (or creating costs for) the private sector. Proponents of the regulations seldom have much to say about such costs, so it behooves the rest of us to keep the potential downside in mind.
This is not to say the Government should not regulate anything. The point is that regulations should be based on a realistic assessment of costs versus benefits, and this has often not been done in practice. See, e.g., The EPA stumbles but will keep moving, 7/6/15.
Many examples of questionable regulations could be given, ranging from the Sarbanes-Oxley Act (which has not ended corporate fraud) to campaign finance reform (which has not made money less important in political campaigns).
There is probably no area in which misguided regulation has had a bigger impact than in the energy sector. And understandably so, as “energy makes the world go round.”
The theory that global warming (which has been occurring gradually, albeit with periodic reversals, since about 1800) is caused by human activity (production of CO2 and other greenhouse gases) has been used to justify several dubious policies:
• Tight restrictions on drilling in as yet undeveloped areas under government control (primarily offshore and in Alaska) – artificially promotes imports.
• Strict regulatory requirements for new refinery capacity - promotes continued operation of obsolete facilities.
• Patchwork of motor fuel standards (which vary by season and from state to state) – boosts motor fuel prices and increases vulnerability to supply interruptions.
• Corporate average fuel economy (CAFE) standards for automobiles sold in the US – boosts vehicle prices and distorts consumer demand.
• Mandates and subsidies for “green” energy (wind and solar power, ethanol in motor fuel) – promotes the use of relatively expensive and/or unreliable energy sources.
• Tightening restrictions on CO2 emissions are proposed, via legislation and/or administrative fiat, which would effectively tax the industrial consumption of fossil fuels and result in higher energy prices throughout the economy.
What would a rational energy policy entail? Basically, the government should take a step back and let private enterprise and the free market decide what kind of energy sources will be used to generate electricity, power motor vehicles, etc. Likewise, consumers should be left to decide for themselves – given the applicable costs – how much energy they want to consume.
This being said, SAFE supports the objective of transitioning to cleaner energy sources in principle. Here’s a rundown on the prime candidates:
• Coal power plants are inherently “dirty,” and over time they will be phased out. There is no need to force this change on a crash basis, however, nor should the government dictate what energy source(s) will replace coal.
• Nuclear power offers low operating costs and a minimal environmental footprint – but it also features high plant costs, risks of a nuclear accident, and unsolved problems re: disposition of radioactive wastes. Nuclear power, August 2008.
• Natural gas is cleaner burning than coal, and it has become more abundant (and less expensive) as a result of the fracking boom.
• Renewable energy sources (wind, solar, biofuels, etc.) may improve in time as the result of technology changes, but for now these power sources are too unreliable and expensive to survive without major government mandates and/or subsidies.
Ideally, the choices involved should be made by buyers and sellers in a free market, without government pressure. Cleaner energy, June 2012.
We have worked hard to educate the public about global warming, and here are several visual aids developed for this purpose. Please feel free to access and use them in your own efforts: •Slideshow (Powerpoint) on global warming facts and the “clean energy” boondoggle
•Exhibit comparing global warming to a real problem (the coming fiscal meltdown due to government mismanagement)