Hans Bader

If you restrict the supply of something, the price will go up.  It’s one of the laws of supply and demand.  Thus, cap-and-trade energy rationing schemes drive the price of energy up, by capping the supply.  President Obama has conceded that in his unguarded moments.  In a January 17, 2008 interview with the San Francisco Chronicle, Obama said that “electricity rates would necessarily skyrocket” under his cap-and-trade plan to fight global warming.  He also said that under his plan, “if somebody wants to build a coal-powered plant, they can; it’s just that it will bankrupt them.”

But journalists are not economists, and often have difficulty understanding the most basic principles of economics.  (Some cannot even do basic math).  What is clear to any economist or any college graduate who has taken Econ 101 seems disputed or unclear to many journalists, who are more familiar with trendy fads in college English Departments, and left-wing critical race theory, than they are with basic economic truths.

So it is that PolitiFact Virginia erroneously rated as “mostly false” the claim that cap-and-trade would naturally lead to “higher” energy bills for Virginia households.  It admitted that “analyses of two measures that have been before in Congress in recent years concluded that cap-and-trade carries a cost for most consumers,” but then claimed that such costs could somehow be offset, even while capping energy use, and result in “an average lower cost for consumers.”  While their effects on the environment may be disputed, it is clear that they raise energy costs for consumers by reducing the supply of energy.  (As a CBS analyst once noted, a Treasury Department analysis pegged the cost of the Obama Administration’s cap-and-trade plan at $1761 per year per American household).

Whatever their theoretical merits, cap-and-trade schemes tend to become vehicles for vast amounts of corporate welfare and special-interest pork by the politicians who craft them, like the Congressional cap-and-trade energy bill backed by the Obama Administration.  That Obama-backed bill contained so many special-interest giveaways that it would have fleeced American consumers without helping the environment, as I explained earlier (it contained environmentally-harmful ethanol subsidies and could have driven industry overseas to countries with less environmental protections).

As Professor Glenn Reynolds notes, if you want to cut carbon emissions, you should eliminate regulatory obstacles to fracking, since fracking cuts carbon emissions far more than costly cap-and-trade regulations do.  By expanding access to clean natural gas, fracking is helping reduce both greenhouse gas emissions and air pollution. As Walter Russell Mead notes at The American Interest, “fracking is doing more to control carbon emissions than all the efforts of all the greens in the world. And by promoting American (and Chinese!) domestic energy production, it is doing more to lay the foundations of world peace than all the peace activists and disarmament campaigners in the world.” Fracking has “driven a natural gas boom in this country and dramatically cut the cost of the cleanest hydrocarbon energy source of them all,” contributing to cleaner air, not just lower greenhouse gas emissions.  It is also expected to greatly reduce our dependence on foreign energy.

As CNN notes, “U.S. carbon dioxide emissions are falling” thanks to things like fracking. “Europe, by contrast, has seen its energy-sector carbon emissions remain basically flat,” even though Europe operates under a costly “cap-and-trade scheme where emissions are capped at a certain level,” and “Europe has significantly higher taxes on energy.”  Countries like Germany have blocked fracking to produce clean energy, even as they cling to a failed cap-and-trade scheme that imposes huge costs while failing to substantially reduce greenhouse gas emissions.

Unfortunately, the Obama Administration has tightened restrictions on fracking, which is permitted under state law in many states.  But it has not been nearly as hostile to fracking as many liberal state governors and legislators, like North Carolina’s Bev Perdue.  By contrast, conservative governors and legislators have supported fracking, which has the potential to greatly reduce greenhouse gas emissions and air pollution.

Environmental Luddites oppose fracking, preferring draconian and utopian energy rationing schemes instead.  They hype non-existent or exaggerated risks associated with it, ignoring the complete lack of any evidence to date that it would harm the environment.

Environmental groups like the NRDC prefer rigid government restrictions on carbon emissions by factories, farms, and vehicles, even though such restrictions could cripple the economy.  If they can’t obtain that (through EPA regulations), then they’ll take a cap-and-trade limit on emissions.

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In recent years, the EPA has sought to block land from being used by claiming that vast tracts of seemingly dry land are actually “wetlands.”  The Clean Water Act gives it the power to regulate “waters of the United States.”  The EPA has interpreted that expansively to effectively mean “moistures of the United States,” treating perfectly ordinarily land as a “wetland” simply because water happens to occasionally flow downhill from it into a ditch or creek.  The four liberal Supreme Court justices largely bought this argument in the 2006 Rapanos case, so the Supreme Court is just one vote away from accepting this interpretation, which would render much of America a restricted “wetland” and financially ruin countless families.  Thus, property rights in America are hanging by a thread.

But yesterday, the flickering flame of property rights temporarily grew brighter. Rejecting the Obama Administration’s arguments, the Supreme Court held that EPA “compliance orders” restricting land use can be challenged in court if they are arbitrary and capricious — for example, if they are based on an erroneous bureaucratic interpretation of what a “wetland” is, that results in dry land improperly being declared an unusable wetland. In his concurring opinion, Justice Samuel Alito explained why such judicial review is essential: the EPA uses vague, inconsistent standards when it declares seemingly-dry land to be a wetland. As Justice Alito pointed out, “far from providing clarity and predictabil­ity, the agency’s latest informal guidance advises property owners that many jurisdictional determinations concern­ing wetlands can only be made on a case-by-case basis by EPA field staff. See Brief for Competitive Enterprise Institute as Amicus Curiae 7–13.”  (Justice Alito was relying on an amicus brief submitted on behalf of a Washington think-tank, the Competitive Enterprise Institute (CEI), by environmental lawyer Theodore Garrett of Covington & Burling).

The E.P.A. has a practice of issuing “compliance orders” to property owners telling them to stop using their land and restore it to its prior condition, under penalty of $75,000 a day in fines, and declaring in such orders that such land is a federally protected wetland. It then waits months or years before actually suing the property owner to collect the fines, which accrue daily, potentially adding up to millions in fines. But in the meantime, it insists that the property owners can’t challenge its claim that their property is a non-usable wetland in court. If they want to take issue with its claim that their property is a “wetland,” they have to wait until the EPA sues them later on to collect the fines, after they’ve racked up potentially millions in fines under the compliance order.  The order doubles the fines that a judge can impose on the property owners when the EPA ultimately sues them, although if the judge later finds the land was not in fact a “wetland,” he can refuse to impose the fines. (In the absence of a “compliance order,” the maximum fine for developing a wetland is $37,500 a day; the compliance order adds another $37,500 per day, bringing the total to $75,000 per day.  Federal law has a broad and counterintuitive notion of what is a “wetland”: for example, in one court ruling, the government was allowed to declare a property to be a “wetland” even though it appeared dry, since water occasionally passed from it into a roadside ditch that in turn flowed into another ditch that flowed into a creek).

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Despite the hundreds of millions of dollars lost in the Solyndra scandal, Energy Secretary Steven Chu gave himself “an A-” when he “testified before Congress after a series of bankruptcies from companies floated by green-tech stimulus loans” and was asked what “grade he would give himself as a steward of public funds.”  But it turns out that Chu’s Energy Department was much more reckless in its lending decisions than the private lenders that the Obama Administration has blamed for the financial crisis (even as the Administration has expanded the role of the government-sponsored mortgage giants and federal affordable-housing mandates that helped spawn the housing crisis), manifested in “an 85 percent failure rate on its process check.”  As Ed Morrissey notes, a recent report from the Government Accountability Office (GAO)

looked at the handling of $30 billion outstanding in loan guarantees and future commitments and discovered that the DOE rarely follows its own written procedures for vetting and auditing applications.  In fact, in many cases, the Loan Guarantee Program (LGP) couldn’t even find the data managers needed to administer the loans properly . .

In the case of Solyndra, the Obama administration ended up overriding the expressed concerns of DOE auditors to grant the solar-tech firm $535 million in taxpayer guarantees, all of which disappeared in the company’s collapse.  In almost every case study investigated by the GAO, important steps got skipped in the reviews that determined whether loan applications would be granted.  In other cases, the documentation was so poor that the GAO couldn’t figure out what the LGP did . . . the process had at least an 85 percent failure rate on its process check.  . .

With $30 billion in taxpayer money at risk, the DOE under Steven Chu didn’t bother to conduct the reviews it claimed it would on applications for loan guarantees, didn’t keep records of what reviews they did accomplish, and signed off on loans with incomplete documentation and inadequate oversight of the risk.  The result — perhaps $6.5 billion immediately at risk, according to CBS, and possibly most of the $30 billion. . . Political connections existed with Solyndra specifically, but the DOE may have felt political pressure to sign off on loans quickly in order to get Obama’s stimulus started. . . the DOE under Chu has been anything but a careful steward of taxpayer money.

As Morrissey notes, Obama has also fostered financial irresponsibility by expanding federal bailouts “to include the real-estate speculators that helped inflate the housing bubble.”  (The speculator bailouts are being done partly with taxpayer money, and partly at the expense of innocent mortgage investors who have never been accused of any wrongdoing). The Administration has also forced some banks to make risky loans to borrowers of certain races, potentially contributing to future bank failures and bailouts.

As The Washington Post noted earlier, energy programs have been “infused with politics at every level” during the Obama administration. It hastily approved subsidies for Solyndra, whose executives are now pleading the 5th Amendment, despite obvious danger signs and warnings about the company’s likely collapse. (Later, federal officials successfully pressured Solyndra to delay its announcement about upcoming layoffs until just after the 2010 election, to avoid embarrassing the Obama administration.)  CBS News reported that there were 11 more Solyndras in the Obama Administration’s green-energy programs.

The Obama Administration has used green-jobs money from the stimulus package to outsource American jobs to countries like China: “Despite all the talk of green jobs, the overwhelming majority of stimulus money spent on wind power has gone to foreign companies, according to a new report by the Investigative Reporting Workshop at the American University’s School of Communication in Washington, D.C.” As the Investigative Reporting Workshop noted, “79 percent” of all green-jobs funding “went to companies based overseas . . . In fact, the largest grant made under the program so far, a $178 million payment on Dec. 29, went to Babcock & Brown, a bankrupt Australian company.” This just one of many ways in which the Obama administration has used taxpayer money to outsource American jobs to foreign countries.

Ironically, in his State of the Union Address tonight, President Obama railed against “outsourcing.”  That was funny, because he has spent billions of tax dollars on subsidizing the outsourcing of American jobs to foreign countries.

In his upcoming State of the Union Address, President Obama will push for more green-jobs subsidies at taxpayer expense in the name of job creation: “With a Solyndra-scandal-be-damned attitude, President Obama is expected to revive his push for new green fuel sources in Tuesday’s State of the Union address, claiming that they will boost jobs.”  But these impractical proposals are haunted by the utter failure of Obama’s existing green-energy programs to produce economically-viable jobs or fuel.

There are only 140,000 jobs in the whole renewable-energy sector, which illustrates the absurdity of Obama’s unrealistic 2008 promise “to create 5 million new green jobs.” Most of America’s existing green jobs predate the Obama Administration, which did not create them: “from 2003-2010, the rate of growth for clean jobs was 3.4 percent.”  By contrast, Obama wiped out 20,000 jobs recently just by blocking the Keystone XL Pipeline, and recent EPA rules will wipe out at least 800,000 more.

More job losses are yet to come: in 2008, President Obama admitted that under his greenhouse gas regulations, people’s utility bills would “skyrocket,” and coal-fired power plants would go “bankrupt.”  That will wipe out vast numbers of jobs in the energy sector.

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CBS News is reporting that there are 11 more Solyndras in the Obama Administration’s green-energy program:

CBS News counted 12 clean energy companies that are having trouble after collectively being approved for more than $6.5 billion in federal assistance. Five have filed for bankruptcy: The junk bond-rated Beacon, Evergreen Solar, SpectraWatt, AES’ subsidiary Eastern Energy and Solyndra. . .Standard and Poor’s had given the [Beacon] project a rating of ‘CCC-plus.’

(A CCC rating is also shared by Greece, a virtually bankrupt nation embroiled in a massive debt crisis).

A liberal Congress must share the blame for this fiasco, since the massive $800 billion stimulus package it passed in 2009 funded these boondoggles. As a Solyndra stakeholder exulted, “there’s never been more money shoved out the government’s door in world history.”  But as the Washington Post noted, energy programs were “infused with politics at every level” under Obama.  His Administration hastily approved subsidies for Solyndra, whose executives are now pleading the 5th Amendment, despite obvious danger signs and warnings about the company’s likely collapse. (Later, federal officials successfully pressured Solyndra to delay its announcement about upcoming layoffs until just after the 2010 election, to avoid embarrassing the Obama Administration).

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