Capitalism and Climate
With President Donald Trump in the White House, healthy Republican majorities in Congress, and a likely conservative majority on the Supreme Court, we are likely to see dramatic shifts in governance across the economy—and perhaps particularly in the energy sector.
The incoming president ran on a platform of energy revolution and U.S. global dominance of the energy sector. If the United States efficiently exploits its vast oil, gas, and coal reserves; if it ends policies that inhibit development of resources offshore and on public lands; if regulators stop giving in to activists attacking public infrastructure projects; if the government overturns burdensome regulations—then we can become energy independent, create large numbers of jobs, build wealth, and reduce prices. This may seem like a radical vision as the Western world is in the grips of a low-carbon energy transition, but it helped propel Donald Trump into the White House.
It seems axiomatic that Trump’s election resulted in part from a popular reaction to the zealous and alarmist stance of the environmental left. In recent decades, the environmental movement has declared it insufficient to respect and be good stewards of the environment. Instead, we have to sacrifice, curtail, restrict, and reduce our way to purity. The movement no longer focuses on the particular needs of local communities. Everything devolves upon a constant, unresolvable global battle between a livable future and certain demise.
Much of this stems from the reverential approach to the environment as a holistic and perfect system—a Mother Gaia—and the singular dogged focus on the unifying threat of catastrophic climate change. The movement has enlisted the wide and expanding powers of the federal bureaucracy to direct the economy toward a future with the proper amount of warming and whatever energy mix it takes to get us there.
It isn’t surprising that the marquee environmental achievements of the Obama administration are almost universally geared toward emissions reductions. The administration gave federal bureaucrats more jurisdiction over seasonal waterways to make it more expensive and difficult to mine coal on state and private lands; assumed new powers for the Environmental Protection Agency over the nation’s electric-generation fleet; and stepped in on decisions over major pieces of infrastructure—notably Keystone XL and the Dakota Access Pipeline—on behalf of the “keep it in the ground” movement. President Obama operated from an environmentalist playbook that pitted wild end-of-days scenarios against the judicious operation of the market and the balanced interests of the general public.
The gulf between the political left and right on the environment is essentially a debate about the role and intrusiveness of government. True, much controversy surrounds such questions as the choice between solar power and coal power, between futuristic solutions and historically reliable fuels. But more fundamentally it is a tension between faith in a bureaucracy with ever-widening tentacles and faith in the ability of the people to find middle-ground, market-based solutions in their own states and communities.
Conservatives view the environment through a lens of localism. Urgent calls to avert global warming are less pressing than concrete goals to preserve community air and water quality; to prudently develop in-state resources; to allow people to work and husband the lands in their own backyards; to preserve opportunities for recreation; and, above all, to defer to local wisdom, experience, and judgment. A decade of policies that interpret the environment as a global system that must be preserved—even at the cost of local jobs and quality of life—has generated substantial policy fatigue and a significant political backlash. More environmentalists than ever now identify with the political right.
The result is that the country, with Trump in the White House, faces a rare opportunity to shape the energy future through the prism of small-government conservatism. The priority list is achievable and comes down to using the instruments of government to get government out of the way.
Competition in the electricity sector is hindered by archaic ideas about natural monopolies, a byzantine regulatory structure, and outdated perceptions about how to value energy. The sector needs to be overhauled in ways that reflect our understanding of competition in the new millennium, that eliminate unnecessary obstacles to emerging and advanced technology solutions, and that streamline the assimilation of preferred alternatives into the electric grid. Some Republican House members already have begun an investigation into how to promote competition in the market. Regulators from the federal level down to the states are considering ways to more effectively incorporate renewable and alternative technologies like battery storage and distributed rooftop solar.
The regulatory machine is outdated, overstretched, and ineffective. Since major environmental legislation was last updated with the Clean Air Act amendments of 1990, serious battles have emerged over the rigor of scientific data needed to issue new rulemaking, the methods used to calculate costs and benefits, and the large number of regulations that work at cross-purposes. There’s a clear role for government to correct market failures, but our regulatory architecture needs to be much more flexible about how and when these failures are addressed.
We can start by eliminating some of the most contentious regulations. The Clean Power Plan wouldn’t do much to reduce emissions, but it would expand dramatically the Environmental Protection Agency’s power over electricity markets. The Renewable Fuel Standard operates more as a subsidy to corn growers than as a policy to diversify and secure transportation fuels; it’s also utterly tone deaf to low oil prices. Since 2009, the Department of Energy has issued more than 40 individual pieces of regulation to improve the efficiency of everything from industrial freezers to light bulbs, driving up costs and restricting consumer choices. This is just a small sampling of the regulations we can eliminate to scale back the hand of government in the market.
There is a general bipartisan agreement that the Department of Energy’s research and development programs need to be overhauled. The innovation agenda is confused and lacks clear goals. The department lacks mechanisms of internal cooperation and doesn’t cooperate well with the private sector either. It eschews efforts to eliminate waste, has deemphasized basic research, and is wholly subject to political horse-trading. DOE operations need to be streamlined.
The debate over how to store spent nuclear fuel long has been mired in obstructive politics. As the nuclear industry awaits resolution on a storage solution, it paid more than $24 billion into the Nuclear Waste Fund while simultaneously storing spent fuel on-site at great expense. There’s a ripe opportunity to move forward with the storage solution identified by Congress and preferred by conservatives—Yucca Mountain—while opening negotiations for interim storage, treatment, and research solutions. Resolving the question of spent fuel storage is a necessary prerequisite to any future investment in nuclear, the largest source of carbon-free power.
Most importantly, energy policymakers must be encouraged and incentivized to advance state sovereignty and defer to local judgment and priorities. This won’t be easy. While legislative majorities and a pro-reform White House are advantageous, environmentalists will spend the next four years resisting and attacking reform. Conservatives should counter by selling small-government, free-market ideals as a better platform for the environment, and even for the climate.
The data are supportive. Despite a decade of relentless regulatory, financial, and diplomatic efforts, private-sector activities have been more important in allowing the United States to cut emissions more than any other country. Thanks to the booming natural-gas sector, energy-related carbon emissions in the first half of 2016 were lower than at any point since 1991. Fully a quarter of renewable energy installed in 2015 was in response to corporate decision-making, not federal or state policy. Sixty percent of U.S. Fortune 100 companies have renewable energy targets. By disentangling political preferences and bureaucratic decision-making from market forces, a new set of conservative policies can help accelerate these trends.
The new Trump administration and a Republican-controlled Congress have an excellent opportunity to shift energy-policy decisions from the government to American businesses and households. Policies that pick winners and sell a centralized vision for the energy future have failed the economy and the environment and were rebuked by the electorate. In the next four years, conservatives can craft a new vision for the energy economy and build a fresh narrative for environmental interests.
Catrina Rorke is director of energy policy at the R Street Institute.