BonzoHansen |
12-21-2007 07:21 PM |
Editorial from today's Journal.
Dim Bulbs
December 21, 2007; Page A18 WSJ
The White House is boasting that the energy bill President Bush signed on Wednesday is actually less ambitious than the agenda proposed in his State of the Union address earlier this year. That's praising with faint damns.
As recently as last week, it seemed the final draft might have raised taxes on the oil and gas industries by some $21 billion to fund subsidies for wind and solar projects. Another provision required that utilities produce 15% of their electricity from "renewable" sources, regardless of supply; currently they are a mere 3%. All that was relegated to a Congressional dumpster, thanks to veto threats from the White House.
The pity is that the entire bill didn't go to the same place. The Administration's environmental views are supposedly paleolithic, but it's long been obvious that Mr. Bush has also bought into some of the Beltway's most useless energy superstitions. This political panic is bipartisan.
Whenever Washington decides to intervene in energy markets, the results run the gamut from the merely wasteful to the genuinely disastrous, like price controls and gas lines. This time the main result will be higher energy prices all around, especially from the bill's two most destructive planks. Neither a major increase in the production of "renewable" fuels nor a ramping-up of fuel-efficiency standards for automobiles will have any real effect on climate change, or "addiction" to foreign oil, or whatever. But while imposing real economic costs, they offer the appearance of "doing something."
The Renewable Fuel Standard requires fuel producers to use at least 36 billion gallons of "biofuels" by 2022, a fivefold increase over the existing mandate, created just two years ago. The current supply comes almost exclusively from corn ethanol, and the new laws will continue that trend with specific, year-by-year usage requirements. Ethanol production will double, with plenty of pork, subsidies and tax preferences to grease the way.
All this while even many hard-core environmentalists are backing away from ethanol. Cultivating row crops like corn is highly energy intensive, often requiring a gallon of fossil fuels to produce a gallon of ethanol. The mania clears more land for agriculture while draining aquifers and increasing fertilizer runoff. Then there are the market distortions, not least higher food and commodity prices.
The evidence is convincing enough that it may even have filtered through to Congress. While there are plenty of handouts for ethanol in the short term, per-year production is capped at 15 billion gallons around 2016. Everyone agrees that this is the "practical limit," meaning that it's hard to achieve a greater yield without plowing over most of the Midwest. Rather than learn a lesson and move on, though, Washington decided to throw a similar subsidyfest for other "alternatives." The balance of the 36 billion gallon quota is made up by biodiesel and fuels derived from cellulosic sources like switchgrass or wood chips.
The problem is that these technologies remain speculative. At best, there are a few pilot programs outside of the laboratory -- but nothing on a commercial or cost-effective scale. The bill will prop up these boutique fuels in hopes of a breakthrough, but essentially it is legislating the creation of a new industry from scratch. No doubt Vinod Khosla and the other California venture "capitalists" are happy to join Big Corn at the federal subsidy trough.
And let's not forget the hike in the Corporate Average Fuel Economy standards, a new mandate that auto fleets hit an average of 35 miles per gallon by 2020, up from today's 27.5 mpg baseline. Such standards are now an obligatory political gesture, but back in reality they're an indirect tax that does almost nothing to influence gasoline consumption. Meanwhile, they put severe burdens on Detroit's auto makers, which have translated the impressive efficiency gains of the last 30 years into the bigger, more powerful cars that consumers have wanted to buy.
Oh, and Washington officially joined the world-wide lightbulb prohibition movement. The regular incandescent bulb has worked fine since the 1880s, but Congress is dictating that it be phased out starting in 2012 in favor of compact fluorescents. CFLs may be more efficient, but here's a textbook case where the market is more illuminating than the dim bulbs on Capitol Hill. Come to think of it, that sums up this whole exercise.
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