Green New Deal: An Economist’s Perspective

As climate change and policies to address it take center stage, it is important to have a constructive discussion that will bring productive and long-lasting results to this important problem. There is no doubt the Green New Deal (GND) has provoked that discussion with its ambitious goals. As ACCF has stated before, we agree that there is a need for policies that will reduce global greenhouse gas emissions. However, we also need to understand the impact of the policies suggested on other sectors of the economy to make any kind of judgement on their feasibility. Without a reliable and consistent estimate, it is difficult to render judgement.  Many back of the envelope calculations have put the cost of the Green New Deal, which currently lacks details, at trillions of dollars. Obviously, there are a lot of discussions to be had surrounding many aspects of the Green New Deal. We wanted to focus on the more technical aspect, whether the Green New Deal can be modelled and analyzed to inform us about its costs and benefits. Who better than David Montgomery, Ph.D., with more than 40 years of experience in economic modelling and energy markets, to answer some of our questions:…

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End Market Distortions to Keep Energy Sector Competitive

To call U.S. power sector developments of the last couple weeks “interesting” would be an understatement. Two weeks ago, the Department of Energy issued a Notice of Proposed Rulemaking (NOPR) that aims effectively to bring back or keep online some of the less competitive coal and nuclear power plants. That proposed rule was followed this week by the announcement of a proposal to repeal the Clean Power Plan, a centerpiece of President Obama’s climate agenda. Obviously, if one or both of these plans reach the finish line, in one form or another, it will mean big changes for the sector. But for time being, let’s focus on the first item, which has been called by experts a “grenade lobbed into competitive energy markets.” The NOPR to the Federal Regulatory Energy Commission suggests the adoption of a rule that would require utilities in competitive energy markets to pay each eligible resource its fully allocated costs (their fixed investment costs plus their electricity production) and a fair return on equity if these plants have 90 days of fuel supply on-site. On the surface, requiring 90 days of fuel supply favors nuclear and coal, since natural gas plants receive fuel through pipelines. It’s…

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Avoid Conflating Renewables and Fossil Fuels in the Subsidies Debate

Here at the American Council for Capital Formation, we have contributed extensive commentary to clarify the definitions of subsidies, deductions, and various tax provisions and their implications on public policy. Often times, we have witnessed progressive public officials, some academics, and even multilateral bodies such as the G-20 and IMF call for the elimination of so-called “fossil fuel subsidies.” These critics have alleged both the U.S. and global fossil fuels industry benefit by subsidies from U.S. and international governments, when the reality couldn’t be further from the truth. Traditional energy producers do not receive subsidies from the United States government – they take tax deductions much like virtually all other manufacturers.

The latest allegation comes from libertarian-leaning Cato Institute in a new analysis released in late December that looked specifically at Department of Energy (DoE) subsidy programs. The analysis’s author correctly pointed out a number of past and current DoE projects where taxpayer dollars have been wasted on mismanaged on ill-conceived projects. They are detailed in nine case studies to substantiate their case to get rid of all subsidies for solar, coal, wind power, and hydrogen fuel programs.

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