Clean Energy Politics

The EPA’s June 2, 2014 announcement of a Clean Power Plan is momentous. On the surface, its scope, complexity, potential for myriad legal challenges and, not to mention, the difficulty of gathering reliable cost and benefit data, make it so. Mothers should advise their children to grow up to be energy lawyers, not cowboys.  However, what makes this proposed rule more significant are the below the surface core principles and concepts that make the Clean Power Plan a game changer for the practice areas of environmental and energy law and policy.

It is a historical curiosity that the field of environmental law preceded energy law in the 1970s. It is also a historical curiosity that these two disciplines developed largely independently of each other, even though they are naturally connected by the physical fuel cycle.  Environmental consequences follow the fuel cycle from the exploration and extraction of the natural resources used to produce energy through their processing and distribution to their consumption and disposal.   

The two disciplines were driven by conflicting concerns, employed different metrics, and used different vocabularies and languages.  Energy lawyers focused on efficiency in the exploration, extraction, and production of natural resources.  Environmental lawyers focused on issues of ecosystem preservation, species protection, natural resources conservation, and human health improvement.  Measuring the costs and benefits of energy production against environmental protection has proven to be frustrating, difficult, and contentious. Indeed, where energy lawyers were more familiar with costs and benefits; environmental lawyers were more comfortable with preservation and conservation aside from economic calculations.  More often than not, the two sides simply talked past each other.

In one, albeit lengthy and complicated, proposed rule, the divide between the disciplines of energy and the environment has begun to close. To be sure, bringing these two disciplines together will create governance as well as legal and regulatory challenges. Nevertheless, by linking this proposed environmental rule to the power sector, energy and environmental lawyers will necessarily have to forge a common language to arrive at common and acceptable solutions to climate change challenges.

The Clean Power Plan, though, exposes another more troubling problem by breaching the energy-environment divide.  Quite simply, on the energy side of the equation, energy laws and policies have largely been nonpartisan for over a century. On the environmental side, however, partisan squabbles were routine as industry interests clashed with environment groups.  With the announcement of the Obama administration’s Clean Power Plan, it is an exceedingly safe bet to make that the politicization of energy will become more intense particularly as the country moves to a clean energy economy.

Since the turn of the last century, the United States has developed a national energy policy with distinct characteristics. This policy had much to commend it for most of the 20^th century. A national energy infrastructure was constructed; universal service was available; energy was reliable and plentiful; energy prices stayed flat or declined; the economy was vibrant; and, a regulatory structure was established that both mirrored and supported particular energy industry firms and actors. As it turned out, the dominant actors in the energy sector shared certain characteristics. For the most part, energy firms process fossil fuels, are large-scale, capital-intensive, and operate nationally and internationally.

The traditional policy is grounded in one core idea: the more energy that is produced and consumed, the stronger the general economy will be.  This was not only an idea that could be embraced by Republicans and Democrats, liberals and conservatives; it was an idea that made great common sense.  As energy production expanded, producer profits were healthy and the cost of energy to consumers was stable over a long term.  Consequently, political conflict over energy was kept to a minimum.

Evidence of nonpartisanship abounds.  President Nixon, for example, imposed price controls on the oil industry. Jimmy Carter deregulated the natural gas industry and he scheduled the decontrol of oil prices among many other energy initiatives. President Reagan accelerated oil price controls in his first act of office. And, every president since Eisenhower has extolled the importance of energy independence from foreign oil. To the extent that renewable resources and energy efficiency were seen as desirable adjuncts of a national energy policy, there have been elements of each in all major energy legislation since the 1970s.

Today, however, we are witnessing a greater politicization of energy for the first time in our history. The politicization started with disagreements about climate change. Those disagreements have now morphed into criticisms of clean energy policy. This increased conflict is politically and economically unfortunate.

Today, the conflict has shifted from a fight between energy and environmental actors to a contest between traditional incumbent (often fossil fuel) energy firms and new environmentally sensitive clean energy entrants who promote renewable resources and energy efficiency.  The new fight is currently being waged in state legislatures and will now be waged in the halls of Congress and in agency hearing rooms as the details of the Clean Power Plan are put in place.

We can already see these energy contests emerging. Recently, states such as Indiana and, soon Ohio, have been cutting back legislatively adopted renewable energy and efficiency mandates. Interest groups such as the American Legislative Exchange Council have been actively promoting state efforts to eliminate renewable portfolio standards by offering model legislation to repeal those laws regardless of their efficacy.2 Legislation has been introduced in several states to make it more difficult for to sell electric vehicles such as those produced by Tesla, and to tax solar installations.  And, continuing conversations around hydraulic fracturing have spawned a number of legislative proposals as well as litigation involving every level of government.  One of the more bizarre bits of legislation is one in North Carolina that would make it a criminal felony to disclose fracturing chemicals in violation of confidentiality or trade secret agreements.

At the same time, though, state legislatures are also considering clean energy measures and most state have adopted renewable portfolio standards and other clean energy measures. As very recent examples, South Carolina has introduced significant solar legislation and the New York Public Service Commission has issued a report on the “grid of the future” which directly impacts the traditional business model of investor-owned utilities. 

At its most positive, these political contests can be interpreted as a demonstration of federalism at work as states become laboratories for legislative and regulatory experiments in the energy sector.  Yet, experimentation comes with costs. Less positively, then, is the fact that a comprehensive national plan to address climate change is unlikely to emerge from such contests and that piecemeal efforts will ultimately fragment an environmentally necessary and economically valuable energy transition.

The increase of political conflict and the proliferation of attacks on clean energy initiatives, however, are deeply problematic. First, the criticisms ignore the last 30 or more years of energy policy studies, which have been critical of the core idea that energy and the economy were the only variables that needed to be addressed in energy policy. Instead, today, energy policy studies, as they have for nearly 40 years, recognize not only the need for energy and its necessity as an economic input; they also recognize the need for environmental sensitivity as well as national security.3  Contemporary energy policy is a four-variable equation that accounts for energy, the economy, the environment, and security. We no longer look at energy as a two variable equation in which there is an inevitable positive consequence between more energy and a better economy. Indeed, for over 30 years the United States has been experiencing increased energy intensity, which simply means we are spending less for the same amount or for more energy.  The Clean Power Plan recognizes the reality and the value of this policy trend.

Today, no responsible conversation about our energy future can ignore the direct connections between energy and the environment. Richard Muller, a physicist from Cal Berkeley, whose work was funded in part by the Koch Brothers, concludes his research with the observation that “an excessive use of energy may be leading us into the greatest catastrophe in human history. . . .”4  Yale economist William Nordhaus echoes that sentiment and concludes his recent book by saying that “global warming is a major threat to humans and the natural world.”5  And, British politician and economist Nicholas Stern assesses global warming as the largest market failure in history.6  To be sure, a business-as-usual approach is directed to assuaging incumbent businesses, but any thoughtful discussion of a future energy policy that ignores global warming or climate change is, at best, negligent.

The increased politicization of a clean energy transition together with a consequent increase in legislative and regulatory conflicts is economically unfortunate for two reasons. First, if we accept the virtues of markets as vehicles for the creation of wealth, stimulation of innovation, and efficient distribution or resources, then we must also accept the need to reduce or eliminate market defects. As just noted, climate change exposes a pandemic market failure. Second, arguments in favor of a clean energy transition are such that the diversity of energy resources will increase; new markets and new actors will enter the sector; and, a broad array of technological innovations will emerge. The transaction costs of conflicts; the resistance to bringing energy and environmental concerns together; and, a continuing commitment to incumbents is an economic drag on a promising energy future. The Clean Power Plan raises these issues in a way that has not been done before and now, the drama will be played out in both the political and economic marketplaces.  The Plan points us in the right direction; now we must have the political will and commitment to follow it.