Morning Bell: Cap and Ban

Conn Carroll / July 14, 2010

The front page of USA Today claims: “President Obama’s attempt to use the Gulf of Mexico oil spill to help propel comprehensive energy legislation has failed.” Don’t believe it for a second. On Monday the Obama administration reissued a ban on offshore oil drilling in the gulf after federal courts twice invalidated the first ban, calling it “arbitrary and capricious.” The new ban is, if anything, more restrictive than the first, thus guaranteeing even more job losses for the already devastated Gulf region. Meanwhile, Majority Leader Harry Reid (D-NV) is set to introduce a bill that will cap greenhouse gas emissions from power plants. Taken together, the President’s Cap and Ban approach to energy policy will accomplish exactly what he set out to do from the very first day he was sworn into office: decrease the amount of carbon the U.S. economy emits by drastically increasing the cost of energy.

The mechanism Sen. Reid will use to cap carbon emissions is Sen. Jeff Bingaman’s (D-NM) renewable electricity standard (RES) legislation (the American Clean Energy and Security Act), which caps carbon from power plants by forcing them to produce a growing percentage of the electricity they produce from government-approved renewable energy sources every year. This is essentially cap and trade but without the trade. If these new renewable energy sources were actually cost effective, there would be no need to mandate them. Cost-minimizing firms would adopt the technology on their own to stay competitive. But renewable energy is not cost-effective. It is significantly more expensive than traditional fuels, hence the need for the government mandates which will raise everyone’s energy costs. The ultimate victim of these higher energy prices will be you the consumer and the American economy. (more…)