Energy Bill – So This is Good Policy?

Oh, joy, the energy bill has passed the House. It appears to be “policy” disguised as a collection of mandates.

On Thursday, just over a year after winning the majority, Democrats in the House of Representatives voted through an energy bill that represents a stark departure from the administration’s approach. It would raise vehicle fuel efficiency (Cafe) standards for the first time in over 30 years, by 40%, to 35 miles per gallon for both cars and light trucks and SUVs. A renewable energy standard mandates that utilities generate 15% of their power from renewables by 2020. It would set a renewable fuel standard aiming to generate 36 billion gallons of ethanol a year by 2022. A tax package would roll back some $13.5bn in oil industry subsidies and tax breaks to help pay for $21bn worth of investments in clean energy development, mainly in the form of investment tax credits for wind and solar, along with the development and purchase of plug-in hybrid vehicles. And it would raise efficiency standards for appliances and buildings.

Oh my, how times have changed! Massachusetts Democratic Ed Markey, chair of the house climate committee, has called it the “perfect political moment” for a sea change in energy policy. Oil prices are flirting with $100 a barrel.

Let’s parse this a little, shall we?

It would raise vehicle fuel efficiency (Cafe) standards for the first time in over 30 years, by 40%, to 35 miles per gallon for both cars and light trucks and SUVs.

And that will do what? Increase the price of automobiles. As usual, it’s a mandate for which you, not anyone else, get to pay.

Of course loopholes do survive – big loopholes. Dan Becker, an environmental consultant and lawyer and former official with the Sierra Club explains:

“If I am G.M., God forbid, and I produce a certain number of flexible-fuel vehicles capable of running on E85 ethanol, they will be assumed to be running on ethanol 50 percent of the time. So the fuel economy of a 20 m.p.g. truck that is technically capable of running on E85 will essentially be 30 m.p.g.

“Because the auto companies are not as stupid as they look, they have chosen to make most of their flexible-fuel vehicles their least-efficient vehicles. So they get the maximum fuel economy benefit.”

Why aren’t these vehicles running on E85 all the time? Because E85 is hard to find in many states. There are only about 1,200 stations selling E85 nationwide and only nine in New York, according to the Energy Department. Even if you can find E85 the mileage is often about 30 percent worse than with gasoline, because ethanol contains less energy per gallon.

Nevertheless, for more than a decade the federal government has joined the auto industry in what amounts to make-believe. That fantasy continues in this bill. No wonder Mr. Becker calls it the “Energizer bunny of auto industry loopholes.”

Indeed. Flexible-fuel Hummers, oh my.

Moving on to “renewable energy”:

A renewable energy standard mandates that utilities generate 15% of their power from renewables by 2020.

And that will require what? Well if your utility isn’t generating any power from ‘renewables’ right now, it will be making a pretty hefty investment by 2020. And who do you suppose will be paying for that?

It would set a renewable fuel standard aiming to generate 36 billion gallons of ethanol a year by 2022.

Aren’t mandates fun? Of course those mandating seem to never do the math:

In this year’s State of the Union speech, he set a national goal of producing 35 billion gallons of alternative fuels by 2017. The next morning, C. Ford Runge, who studies food and agriculture policy at the University of Minnesota, calculated that this would require 108 percent of the current crop if it all came from corn.

And sure enough, even with the relatively small amount we produce, we see food costs rising because of the diversion of food sources such as corn (for both human and animal consumption) to fuel, while the science of converting cellulose to ethanol is both expensive and imperfect. So who do you suppose will pay for all of this in higher food prices?

To give you an idea of what is being mandated here, consider that the world production of ethanol in 2006 was 51 billion liters, (13.5 billion gallons), with 69% of the world supply coming from Brazil and the United States. Also consider that there is evidence that it takes more energy to produce ethanol than it produces when used (although it is claimed that it produces 34% more energy than is consumed to make it. Compare that with oil which has is at about 300% more energy produced than consumed to make it). And let’s not forget the CO2 ethanol produces when burned.

A tax package would roll back some $13.5bn in oil industry subsidies and tax breaks to help pay for $21bn worth of investments in clean energy development, mainly in the form of investment tax credits for wind and solar, along with the development and purchase of plug-in hybrid vehicles.

Now, as you know, I’m not a friend of subsidies of any type, but here we have oil at near $100 a barrel and we’re going to remove a big chunk of subsidies while giving tax credits to tiny industries which produce maybe a few percent of our present energy needs? Wow. Any wonder who’s going to pay for that?

But speaking of subsidies and loopholes we apparently don’t mind subsidizing Indonesia’s biofuels for Europe:

The Christian Science Monitor recently reported that because of the way U.S. biofuel laws are written, foreign tankers loaded with Indonesian biodiesel can stop briefly at an American port, blend in a splash of regular petroleum diesel and qualify for a U.S. subsidy on every gallon. It’s called “splash and dash,” because the tankers generally push on to Europe to collect additional subsidies there. All in the name of greener fuels.

Yes your money is safe with Congress, an institution which always spends it wisely. [/sarcasm]

And it would raise efficiency standards for appliances and buildings.

Oh, good. I’m sure that’s free of cost, isn’t it?

And yet we have some politician saying it is the “perfect political moment” to be doing this? I refer you to my previous post about “Politicians on crack“.

As reported by The Guardian, this is hardly some sweet little energy bill in which everyone benefits (although the author of the piece seems to think it borders on wonderful). In fact, it is a raft of mandates which are going to cost huge amounts of money and, if I were to guess, deepen the energy crisis, not alleviate it.

In the short run, fossil fuels are the fuel of choice because they are both available and relatively cheap. They should be exploited with an eye toward driving the price per barrel down, not up – that is if you’re a fan of seeing the economy continue to do well and not have continually and consistently rising fuel costs impact all costs across the board.

Alternative energies aren’t ready for prime time. As the article points out, we’ve been playing this alternative energy game since the ’70s and Jimmy Carter’s “solar” gambit and where are we? A very, very long time and large investment away from any viable and sizeable energy production from them, that’s where. What we shouldn’t do, as we continue to chase the alternative energy unicorn, is make it harder, more expensive or more restrictive to exploit the energy resources we do have.

Once we have viable and cleaner alternative energy sources perfected and ready to go, then it makes perfect sense to begin phasing one technology out as the other is phased in. That would be a viable energy policy. That’s not what I read this energy bill doing (at least as The Guardian has presented it).

Then there is the latest savior of us all – ethanol. Less efficient and just as polluting (although in a slightly different way) than gasoline. So we raise the CAFE standards and then mandate the use of a less efficient fuel? And that’s “good policy”?

No. It’s not. But it is the policy, it seems, we’re going to be stuck with if Congress gets its way. So grab your wallet and get ready for the tug-of-war for its contents. A lot of its contents.

First published at QandO. Please come visit us.

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