‘Soft Kyoto’ Strategy Raises Energy Concerns

Published October 1, 2003

Determined to pass energy legislation before Congress adjourned for its August recess, Senate leaders brokered a deal replacing this year’s Republican-drafted bill (S. 14) with last year’s Democrat-drafted bill (S. 517).

Building a Kyoto Framework

S. 517 affirms the Kyoto Protocol’s vision of an impending climate catastrophe caused by man-made emissions of carbon dioxide (CO2), the inescapable byproduct of fossil fuel energy generation. If Congress puts its seal of approval on such alarmism, it would mobilize pro-Kyoto lobbying both inside and outside the U.S. government.

S. 517 would create a White House climate czar charged with the tasks of developing and presenting to Congress a national carbon reduction strategy. In other words, the bill would establish a permanent institutional base within the Executive Branch for anti-energy advocacy.

In addition, S. 517 would set up a national registry to track companies’ carbon emissions. If after five years companies producing at least 60 percent of estimated U.S. emissions decline to “volunteer” for the emissions reduction program, participation becomes mandatory, enforceable by fines of up to $25,000 per day. The bill would build the monitoring and enforcement framework for a future Kyoto-style emissions cap-and-trade program.

Finally, S. 517 would institute the first nationwide “renewable portfolio standard” (RPS) for the electric power sector. An RPS is a regulatory scheme requiring a specified percentage of electricity to come from solar, wind, and other politically correct technologies. Under S. 517, 10 percent of the nation’s electricity would have to come from renewable sources by 2020.

The Republicans who will control the House-Senate conference committee on energy legislation are no fans of S. 517. Senator Pete Domenici (R-New Mexico) has suggested S. 517 is irrelevant, stating: “We’re the majority. We write the bill in conference.” The outcome of the conference committee’s work, however, is far from certain.

Renewable Power Play

As part of the deal moving energy legislation out of the Senate, leaders agreed to schedule debate on the “Climate Stewardship Act” (S. 139), sponsored by Presidential aspirants Senators John McCain (R-Arizona) and Joe Lieberman (D-Connecticut). Like the Kyoto Protocol, S. 139 would impose caps on carbon dioxide emissions from the U.S. power, manufacturing, and transportation sectors.

McCain says he does not expect Congress to enact his bill. However, conference committee members may feel they have to accept a renewable portfolio standard–a top priority for Senate Energy and Natural Resources Committee ranking member Jeff Bingaman (D-New Mexico)–in order to look “green” and produce a bill Democratic leaders can support.

The possibility of an RPS provision in the energy bill raises several red flags for energy economists and policy analysts.

  • An RPS is fundamentally a set-aside program–corporate welfare that would not exist in a free market. At whatever level it is initially set, the RPS will function as a floor, not a ceiling. Once enacted, it will strengthen the renewable-energy lobby and grow like other entitlements. The potential to exploit consumers, misdirect capital investment, and undermine the productivity of electric-intensive industries is great. In March 2002, John Kerry (D-Massachusetts), Lieberman, and 27 other senators voted for a 20 percent RPS–twice the size of S. 517’s mandate. Enacting a 10 percent RPS would encourage them to keep pushing, year after year, until Congress ratchets up the RPS to 20 percent or higher.
  • A nationwide RPS is an unfunded, one-size-fits-all federal mandate. Why require states to develop implementation plans for meeting federal clean air standards if Congress is going to dictate the details of those plans? States are already free to subsidize and mandate the use of renewables if they wish, and many do. A nationwide RPS tosses federalism out the window.
  • If Congress forces the power sector to use more non-fossil energy, utilities will have less reason to resist Kyoto or McCain-Lieberman, since they will already effectively comply with a carbon cap. Some may even lobby for McCain-Lieberman, figuring their renewable portfolios will make them net sellers of carbon credits under a cap-and-trade program. Instead of mollifying the Kyoto crowd, enacting an RPS will simply tee up McCain-Lieberman for the next round.

Compromises that advance your opponent’s agenda and build his power base are seldom stable and never smart. For this reason, many energy experts prefer no energy bill to a bill with a renewable portfolio standard.

Marlo Lewis is a senior fellow at the Competitive Enterprise Institute. His email address is [email protected].