GOP Presidential Hopefuls Call for Ending Energy Subsidies

Published September 9, 2015

With less than six months remaining until the Iowa caucuses, presidential hopefuls are revealing their positions on one of the biggest energy issues in the state: the Renewable Fuel Standard (RFS).

RFS requires refiners to blend certain amounts of renewables into fuel, and Iowa ethanol producers benefit from the mandate.

GOP candidates are split on the issue. At the Iowa Ag Summit in March, Sen. Ted Cruz (R-TX) announced his opposition to RFS, telling voters the government shouldn’t be “picking winners and losers” through its energy policy.

Former Hewlett-Packard CEO Carly Fiorina has also come out against RFS, saying “government shouldn’t be in the business of subsidizing anything,” because it distorts markets. She notes the RFS, though not a subsidy, is just another, “example of government using its power to move markets in a particular way.”

Some candidates have praised RFS but also have said is shouldn’t be permanent. Former Gov. Jeb Bush (R) told an Iowa crowd the standard had “worked, for sure … [but] at some point we’ll see a reduction of the RFS need because ethanol will be such a valuable part of the energy piece of our country.”

Louisiana Gov. Bobby Jindal (R) said ethanol “has played a great role in making us more energy-independent,” but he says it should be phased out.

Wisconsin Gov. Scott Walker (R), who previously supported biofuel mandates, recently signaled his support for phasing out the mandate over two years.

New Jersey Gov. Chris Christie (R) and former Arkansas Gov. Mike Huckabee (R) support the ethanol mandates.

Nicolas Loris, a fellow for The Heritage Foundation, says the RFS mandate is a prime example of how overreaching government intrudes on the free market.

“[RFS] tests the principles of the candidates because this is a policy that is Exhibit A for picking winners and losers,” Loris said, noting RFS raises energy and food prices.

“It’s important for candidates to take a stand and say this policy isn’t working,” said Loris. 

Ending Government Favoritism

Loris says the next president should have three main objectives in energy policy: opening access, ending government favoritism, and reducing the regulatory burden.

RFS gets outsized attention because of Iowa’s first-in-the-nation caucuses, says Loris.

“… [T]here are so many policies that distort energy prices in an adverse way.” Loris said, “Whether it’s targeted tax credits like the wind production tax credit, the Renewable Fuel Standard, or the Jones Act, which hurts the shipping industry, eliminating favoritism that concentrates the benefits to a select few should be a priority.”

Policies that promote or reject government favoritism are likely to be an important part of the 2016 presidential election. When Hillary Clinton announced her energy agenda in July, she called for extending renewable energy tax incentives. Also in July, Bush made headlines when a video at a campaign event captured him saying he wanted to end all subsidies for the energy industry, a move that would phase out tax credits for the wind, solar, and oil and gas industries.

Loris says government subsidies do long-term harm.

“These policies do much more harm in the long run to these technologies than actually help them, because it creates this dependence on the government, preferential treatment, and it doesn’t allow them to recognize their true price point at which they can become economically viable,” Loris said.

Talking About Regulatory Issues

As the election draws closer and debates over energy issues continue, Loris says candidates should not allow themselves to be pigeonholed as either pro-business or pro-environment.

“I think too often politicians will say it’s a tradeoff between economic growth and environmental protection, and those two are not mutually exclusive,” said Loris. “Policies that promote free markets and economic growth do a much better job of cleaning up the environment and protecting it. So, it’s not about wiping out regulations, it’s [about] ensuring we have regulations that are done smartly and devolved down to a state and local level, because those are the people who care and want to protect their own backyards.”

Ann N. Purvis, J.D. ([email protected]) writes from Dallas.