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Energy Reform: A Legislative Washout?

Congress is shifting U.S. energy policies toward green alternatives. Is the new direction temporary or permanent?

Fortnightly Magazine - August 2007

shift tax burdens onto the petroleum industry, in practical terms even the Senate’s failed $32 billion package only would nudge the transition away from fossil fuels. Ultimately, a major shift toward green energy will increase costs for consumers.

How cost factors affect policy trends depends largely on those policies themselves—how aggressively lawmakers push the transition, and how willing they are to disrupt energy markets that depend on existing regulatory and tax structures remaining more or less the way they are. Every change in energy policy yields winners and losers, and lawmakers are challenged to weigh the costs and benefits honestly, at the risk of alienating one group or another.

“Most politicians are selling free lunches,” says Jerry Taylor, a senior fellow with the CATO Institute in Washington, D.C. “They are happy to justify market-rigging exercises as a means to secure energy independence, and that just shows the ignorance of the American public about energy. The government’s ability to reduce prices and promote alternative technologies is nearly zero, and we should leave these markets alone—but you won’t hear most politicians making that argument.”

Instead, legislators work to enact policies that protect their most important constituencies, while balancing the risks and rewards as fairly as possible. The results, as the late Congressman Udall observed, aren’t necessarily effective. And the really tough job—implementation—is left to power companies and regulators who must make policy changes work, while ensuring utility services remain reliable and affordable.

“An emphasis on green energy is just a component of our national energy strategy,” Garvin says. “Renewables have become much more economic and are being widely deployed. But the notion they will displace baseload units is just fiction. As a nation, we have a long way to go to ensure our energy security.”