A Flawed Approach on Climate, Energy

Jack Gerard
Posted September 17, 2015

Below is the first of a short series of posts on the intersection of energy development and efforts to meet climate-change goals. In this post, API President and CEO Jack Gerard comments on the Obama administration’s Clean Power Plan and its flawed approach of picking winners and losers in the energy sector.

On Monday, Aug. 3, the Environmental Protection Agency (EPA) announced sweeping new carbon regulations for power plants. By Wednesday, Aug. 5, the government announced carbon emissions from power plants in April 2015 reached a 27-year low.

Did the costly, top-down mandates of the Clean Power Plan really work that quickly? Of course not. The dramatic emissions reductions are the result of market forces that have nothing to do with heavy-handed government regulations and everything to do with the fact that the United States is the world’s leading producer of natural gas.

With such an abundant supply of affordable fuel on hand, power plants already have an incentive to use cleaner-burning natural gas without government interference. Many of them already do, and it’s working. In President Obama’s own words, the United States “has reduced our total carbon pollution by more than any other nation on Earth.” Increased natural gas use was responsible for over 62 percent of electric power sector CO2 savings from 2005 to 2013, according to an Energy Information Administration (EIA) study.

Conclusion? Fossil fuel development and environmental progress are not mutually exclusive. Otherwise, the U.S. would not lead the world in both oil and natural gas production and carbon reduction simultaneously.

The Clean Power Plan ignores all that in favor of designating winners and losers in our energy supply, and that interference with the market could have dire economic consequences. All energy sources have a role to play in supplying America’s energy needs. But artificially giving EPA command-and-control authority over electric power production could stifle innovation, destroy jobs, and raise energy bills for those who can least afford it. EPA’s own projections even show that numerous states are on track to reduce emissions more quickly without the Clean Power Plan than with it -- meaning the mandate essentially forces American families and businesses to pay far more money for fewer environmental benefits.

Paying more for less is becoming something of a theme with Obama administration energy policy. The Clean Power Plan shares much in common with the Renewable Fuel Standard, which forces Americans to buy ethanol-laced fuel that gets poorer mileage, threatens engine damage and yields 27 percent more greenhouse gases over its full lifecycle compared to regular gasoline. That’s on top of the increased food costs that result from diverting more than 40 percent of the U.S. corn crop from food to fuel. As with the opposition to new carbon regulations, the broad coalition of organizations fighting unrealistic ethanol mandates – which includes restaurant and grocer associations, the producers of poultry, pork and beef, and even environmental groups – demonstrates just how damaging these policies can be.

It all comes back to market freedom versus government interference. A new study crystallizes the stark difference between the two paths. Market-driven energy policies – including lifting the crude export ban and allowing more access to offshore resources -- could generate approximately 2.3 million more U.S. jobs and add $118 billion per year to the nation’s household income, according to consulting firm Wood Mackenzie. Energy policies that stifle production and refining could cost the economy 830,000 potential jobs.

The Obama administration used to recognize the importance of a diverse energy mix and the value of natural gas in driving down emissions and reducing Americans’ energy costs. In 2012, President Obama stated, “We’ve got to invest in a serious, sustained, all-of-the-above energy strategy that develops every resource available for the 21st century.” With the Clean Power Plan and other regulations that ignore market realities, “every resource available” has transitioned to only the most politically expedient resources.

When the government picks winners and losers in the energy mix, the American people lose.