Energy and the Election

by William Yeatman on November 4, 2008

Energy issues have figured in the presidential campaign, but global warming has seldom been mentioned.  That shouldn’t be surprising: sky high gasoline prices this summer made Americans angry, while global warming remains a yawner for most people outside the bi-coastal elite and the chattering class.  Yet, global warming is almost certain to be a much bigger issue for the next President and Congress than addressing high energy prices no matter who wins the elections.  Both Senator Barack Obama (D-Ill.) and Senator John McCain (R-Az.) are committed to enacting cap-and-trade legislation to reduce greenhouse gas emissions.

There has been a flurry of activity by conservative activists the past few days to publicize Senator Obama’s comments about bankrupting the coal industry, which were made some time ago but have only attracted attention now.  What he said in an interview with the San Francisco Chronicle in January was:

“So if somebody wants to build a coal-powered plant, they can; it's just that it will bankrupt them because they're going to be charged a huge sum for all that greenhouse gas that's being emitted. 

This comment is an indication that Senator Obama has a realistic view of the direct effects of his proposal.  Cap-and-trade is energy rationing.  Since coal produces more carbon dioxide than oil or natural gas, it will be hit first.  The consequence is that people in coal States are going to have to pay a lot more for electricity.

Higher electricity prices will lower spending on other things, thereby putting people out of jobs, and drive energy intensive industries to other countries, again thereby putting people out of jobs.  Since utilities were having a hard time keeping up with increasing demand until the economy started to slow down, it is also almost certain that discouraging new coal plants will lead to regional blackouts if the economy does pick up again. 

It is not clear whether Senator Obama has enough basic economics to understand this.  Or maybe he believes what he’s been told by environmental pressure groups, namely that there are plenty of cost-competitive alternatives to replace the coal that provides over half of our country’s electricity.  Or maybe he doesn’t care or indeed thinks it’s a good thing to reduce economic growth.   

Senator McCain also supports cap-and-trade legislation, but has been much less realistic about its direct effects.  He has talked about how making energy more expensive and requiring clean coal technology (that is, equipment to sequester and store carbon dioxide emissions) will create jobs and boost economic growth.  That cannot possibly happen.  His economic ignorance appears to be almost total. 

But the key point is that both presidential candidates strongly support a major policy that will not lower energy prices, but raise energy prices significantly.  Too bad it wasn’t discussed in the campaign.  It will be interesting to see how the American people react to this surprising news in a few months.

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