While a few provisions are worth embracing, most of its 1,724 pages represent a waste of good timber.
Peter Van Doren and Jerry Taylor are with the Cato Institute. Contact Van Doren at firstname.lastname@example.org.
After four years of legislative trench warfare, contentious legal wrangling, and heated partisan rhetoric, President Bush finally got what he wanted—a really big energy bill. What he did not get, however, was an internally consistent "national energy strategy." Examination of the legislation reveals that its title—the Energy Policy Act of 2005—is less descriptive than the title popularized by Sen. John McCain: the No Lobbyist Left Behind Act of 2005.
The energy bill is an intellectually vacuous document. There is little sense that Congress gave thought to how energy markets work, how they fail to achieve efficiency, and how government intervention might make energy markets work better. Instead, the bill is a massive wish list of contradictory requests forwarded by lobbyists to transfer resources from the general public to their employers.
The Economics of Subsidy
The most remarked-upon feature of the new law pertaining to the electricity sector is the dizzying array of regulatory preferences, tax incentives, and direct subsidies employed to favor some fuels and technologies at the expense of others. By now, the details of those market interventions are fairly well known to the industry. Investments in nuclear power, "clean" coal, and various renewable energy sources are made more attractive than comparable investments in natural gas-fired generators and conventional coal-fired power plants.