A New Direction in Energy Policy

There’s been a lot of talk regarding which environmental groups support and oppose Waxman-Markey. It’s easy to see why the current compromise bill is unpopular in some circles, the bill as written is far from ideal using most any criteria. At the same time the Waxman-Markey would launch a entire new trajectory on energy policy, which is why global warming activists stalwarts like Al Gore continue to support it.

Which has got me thinking about what would really change under Waxman-Markey. U.S. energy policy has been on a fairly similar trajectory from 1980-2008. Previously Carter had strongly supported conservation efforts and government lead research, both ideas were gutted by Reagan. Oil prices hit all time lows during the 1980s and relieved any pressure to change course. Bush Sr. was more supportive of air pollution controls, but generally followed the direction laid down by Reagan. Clinton was more hostile to expanded exploration and more supportive of research, but it’s hard to see what major changes happened. Clinton signed the Kyoto protocols, but didn’t even pretend to fight for it’s passage. Policy got worse under Bush II, but a lot of big things showed continuity. Under both Clinton and Bush II funding research was a big deal, but decades off technologies got big money, while ready to go technology was underfunded.

The basic result was foreign oil kept flowing in, energy consumption overall went up, and a wide variety of energy sources were tapped. Waxman-Markey would reverse the overall energy consumption trajectory (Theoretically overall energy consumption wouldn’t have to go down, but I think it almost certainly would) and certain energy sources would necessarily get phased out. Both are big game changers.

Before ethanol and oil could find harmony, and all major sources of energy would play nice with each other hoping that if they didn’t trash each other then they could all make out like bandits. Under cap and trade it’s a zero sum competition for survival among dirty energy sources. It’s not like they’ll get replaced over night, but they won’t be part of new projects.

I imagine that professional energy analysts have very good projections on how hard natural gas, oil, and coal will get hit, but the cool thing about cap and trade is the market picks the winners. But in some cases the losers are pretty easy to predict.

Which is why coal and ethanol supporters want so many concessions and why big oil producers are running television commercials on every Sunday morning talk show.


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