Who needs a national energy policy? Not the U.S.

The Republican tax plan about to pass Congress and get President Trump’s signature is proof positive that the United States does not have a national “energy policy.” And that’s a good thing.

During the Obama administration, national energy policy was “all of the above.” That’s my idea of a good national energy policy: a meaningless formulation without specifics. It’s far better than “some of the above,” with high-minded experts separating “some” from “others.” Trump’s appears to be “America first,” which is totally devoid of content.

The energy provisions of the abominable GOP tax plan – take from the poor to benefit the rich – are a chaotic mess with no clear theme or direction. They will have no discernible impact on the U.S. or the world. The tax strategy is driven by industry lobbyists and special interests. Its provisions will be litigated for years to come. Those who expect coherence in what is an ad hoc and ever changing political and policy landscape are naïve.

The U.S. approach – talk big, subsidize everything, and maybe sort it out eventually, someday, far into the future – seems to work far better than centrally-planned, bureaucratically-driven, overarching “policies.” The U.S. has moved over the past 50 years from oil ascendency to oil dependency back to oil ascendency. Natural gas has transitioned from a scarce, ever-more-pricey fuel, into the abundant, low-cost spread. Coal was king. Now it’s in exile. Carbon dioxide emissions – for what they are worth, which is not much if markets around the world are correct – are declining faster in the U.S. than elsewhere, despite eschewing anything resembling “policy.”

Don’t get me wrong. I loathe energy subsidies of all stripes. I hate ZECs and RPSs equally. I would rather have markets that play without government thumbs on the scales. For some 40 years the U.S. has moved away from centralized decision-making to letting markets work. The mantra, originally pushed by conservatives (and abandoned by Republicans of late) but ultimately embraced by many liberals, is that the government should not pick market winners and losers. Only consumers lose under that paradigm.

Generations of government direction of power markets at the state and federal level resulted in prices to consumers that were inflated by multiple governmental thumbs on the price scale, encouraging gold-plated generation and subsequent rate shock. Federal controls on crude oil prices led to long lines at gasoline stations in the 1970s and odd-even days for consumers to buy petrol. Federal price controls on natural gas kept prices high and produced shortages in interstate (but not uncontrolled intrastate) commerce.

Energy policy in the 1970s

That’s changed. Market competition has become dominant. Energy prices are mostly under control. Gasoline is relatively cheap. Electricity prices aren’t rising. Home heating is affordable. Calls for centralized policies – carbon taxes, the favorite of many economists, for example – have mercifully failed.

But Congress has consistently inserted itself into the market matrix, using tax policy to attempt to pick winners and losers, most often failing. The estimable but young energy reporter Amy Harder at Axios offers the conventional, policy-centric critique of the tax bill:

“The massive tax bill Congress is set to approve this week does little to simplify complicated tax laws that impact the energy industry, keeping intact most energy subsidies totaling tens of billions of dollars. The prospect of a tax on carbon emissions, which would both raise revenue for the federal government and help level the playing field between polluting and non-polluting energy resources, never had a chance.”

In the barbecue of bargaining over the tax bill, all the special economic interests pushed for reserved spots at the federal tax table. The resulting incomprehensible mishmash – the Brits call it a “dog’s breakfast” – means that every interest (except consumers, of course) has an edge. That means, if U.S. energy history is guidance, that nobody has an edge. All of the above, baby.

It will get even more contorted soon. Energy interests, led by Alaska’s worthy GOP Senator Lisa Murkowski, chair of the Senate Energy Committee, will soon push “tax extender” legislation to include energy industry goodies left out of the main tax bill.

Lisa Murkowski

The outcome of the current disorganized process is more likely to be positive than if a bunch of hairy economists, bald policy mavens, bespoke lobbyists, Birki-shod greens, and off-the-rack regulators of all genders, races, colors, and creeds assembled at a conference room at the Brookings Institution or the American Enterprise Institute to come up with a coherent, comprehensive national energy policy for the next five or 10 years.

We’ve tried that before to no good outcome. The most recent was the benign, well-meaning attempt by Adm. James Watkins, George H.W. Bush’s energy secretary, to create a “National Energy Strategy.” It was, simply, a flop that had no chance of success.

Would such an endeavor in 2007 have anticipated fracking? Or lithium ion batteries? Or the price curve for wind and solar? Markets, even if messed with by grubby politics and bearing the faint smell of corruption, work better than overt government policy that is always doomed to failure and carries its own major risks of corruption.

— Kennedy Maize