Cato Crushes Romney on Energy R&D

By Kennedy Maize (@kennedymaize)

Washington, D.C., 15 October 2012 – Would Republican Mitt Romney be tougher-minded than Barack Obama when it comes to some of the most egregious energy subsidies flowing out of Washington? As election day mercifully approaches, a duo of libertarian energy experts has examined Romney’s rhetoric on energy. They find that “the stench of politically convenient hypocrisy is unavoidable.” That pungent pronouncement applies to Romney’s policies on coal technology, biofuels, and nuclear power.

Jerry Taylor and Peter Van Doren of the Cato Institute take up “Mitt’s Romney’s Energy Plan” and find that when it comes to government picking energy winners and losers in the marketplace, Romney largely mimics Obama on big-ticket technologies. Romney rightly hits Obama on his Pollyannaish views on “green” technologies, say Taylor and Van Doren. This policy has been an “abject failure,” although the Republican nominee has never specifically said he will end them if he becomes president.

But when it comes to coal, corn, and atoms, Romney (following both Obama and George W. Bush) would continue filling the federal trough. First, there is “clean coal” – a phrase Taylor and Van Doren note is “elastic” but which has come to signify carbon capture and sequestration. Bush lavished $2.3 billion on carbon capture R&D and Obama upped the ante to $3.4 billion. Romney appears to be calling for more of the same. “If government shouldn’t be in the business of ‘picking winners,’” argue Taylor and Van Doren, “why make an exception for alleged ‘winners’ in the fossil fuel sector? Furthermore, why shouldn’t coal companies pay for their own R&D?”

So, too, on politically-potent biofuels, and the federal mandate for production of 23 billion gallons of ethanol to be added to gasoline, including 8.5 billion gallons of “cellulosic ethanol,” for which no commercial technology currently exists. Without a “Soviet-style mandate,” say Taylor and Van Doren, the fuel ethanol edifice (they say nothing about the drinking variety) would collapse. It’s impossible to square Romney’s support for ethanol with his statement: “Instead of defining success as providing enough subsidies for an uncompetitive technology to survive in the market, success should be defined as eliminating any barriers that might prevent the best technologies from succeeding on their own.”

Then there are nukes. Attacking the Obama administration’s big federal loan to the dodgy Solyndra solar firm, Romney opts “for far larger, equally risky $18 billion of federal loan guarantees for new nuclear power plants.” Romney blames government rules and delays for the ills of the nuclear business. Nonsense, reply Taylor and Van Doren: “Massive capital costs, low coal and natural gas prices, and a long history of cost overruns – not bureaucrats – explain the lack of construction activity even according to the industry itself.”

Viewed as a whole, Romney’s approach to energy and natural resources looks a lot like Obama’s: incoherence and ignorance, weighed down by mythology and illusion. “In short,” say Taylor and Van Doren, “the right-wing fantasy that the feds killed (and are continuing to kill) nuclear is little different from the left-wing fantasy that ‘Big Oil’ killed renewables.”

What would Taylor and Van Doren propose as a logical alternative to the Obama-Romney energy research and development policies? “Eliminate all tax preferences, production and consumption mandates, and direct expenditures for the oil, coal, gas, nuclear, and renewable energy industries,” they advocate. “Let the market – not politicians – decide what’s to be built and let the best fuel win.

“Energy is no different than any other commodity in the market place. There is no ‘BTU exception’ to insights found in The Wealth of Nations. The only ‘market failure’ arguably found in the energy sector is the uninternalized environmental externalities associated with energy consumption. Rather than address that problem with government (read, political) decisions about what fuels to use, better to internalize those externalities through taxes and then let the market work as designed.”