Friday, December 21, 2007

The Energy Independence and Security Act; a cloud with no silver lining

With almost no attention given to it by the public, congress passed and the president signed into law a bill that will change the life of every American. Why did this happen; because the news media reported the event as if it were a miraculous achievement instead as the devil’s handiwork it is, and to top it off the spin by the Democrats and other supporters is positively Orwellian.

The new law is called the Energy Independence and Security Act (EISA). Like most laws, the title has nothing to do with what the law does; it provides neither “independence” nor “security”. The avowed purpose of the law is to provide energy, i.e. oil, independence which would increase our security. However, EISA contains not one word about increasing the supply of oil to our country. The real purpose of EISA is to further the aims of the global 'warmists' by embarking on cut backs of greenhouse emissions in the grossly mistaken belief that you and I are responsible for global warming by our desire to live a quality life different from people in second and third world countries.

The answer according to environmental extremists and others who want to redistribute wealth around the world, mainly from the United States, is to reduce the American quality of life by imposing limitations on what we do and how we do it. Passage of EISA is one of the biggest steps on energy the United States has taken since the oil crises of the 1970s, but its full costs will not be known for years.

The law’s centerpiece is the requirement for a significant increase in average fuel economy, or CAFÉ standards, which have been 27.5 miles a gallon for cars and 22.2 for light trucks, SUVs and minivans since 1985. Under the new law each manufacturer's fleet of passenger vehicles would have to average 35 miles per gallon. As laudable as this may seem because of the higher price of fuel, it is accompanied by a requirement to use substantially more ethanol by 2020, a roughly 40 percent increase over current standards, for cars and trucks.

Beyond costs, in order to meet the tough new CAFE standard, cars and trucks will need to be lighter, which makes them less safe in collisions. A National Academy of Sciences study concluded that vehicle downsizing costs 1,300 to 2,600 lives per year. A tougher fuel economy standard would likely add to the death toll from vehicle crashes.

Smaller vehicles will have to be manufactured to comply with federally mandated rules which also raise the issue of consumer choice. It’s not as if fuel-efficient cars and trucks are currently unavailable, a variety of such models are already on the market for those who want them, including a growing number of hybrids. Although these vehicles may fit the needs of some people, others choose to buy larger, more comfortable vehicles. It is likely the American car-buying public does not want the federal government to force smaller vehicles on them.

In theory, consumers can save money at the pump by being made to switch to more efficient vehicles, and at the same time reduce greenhouse gas emissions and oil imports, but doing so will raise the prices of vehicles and the additional cost could more than negate the energy savings. Furthermore, the increased cost associated with ethanol production, and the affect on food prices are substantial but never factored into the equation by the environmentalists. For example, there is a government subsidy of $0.51 per gallon of ethanol paid to producers, as well as a tariff of $0.54 per gallon of ethanol imported.

The new energy law also includes a slew of new programs which will create a new industry based at ethanol made from sources other than corn, such as forest and field waste, switch grass, and agricultural waste. These second-generation biofuels are far from a proven technology. According to a recent New York Times report, "No fuel of the type in question has been produced commercially in the United States”. Even those who support uses of biofuels acknowledge that "the technology required has not yet been developed, the economics are uncertain and the potential for unintended consequences are very high".

Nonetheless, the ethanol mandate is extensive. Experts who have analyzed EISA say that "[h]undreds of new factories will be required, perhaps a billion tons of plant material will need to be hauled around every year, and estimates of the required investment start at tens of billions of dollars."

With the industry and technology in their infancy, the future of second-generation biofuels is very uncertain. Congress should not make the same mistake it made with first-generation biofuels, such as ethanol, by hastily subsidizing the industry through mandates and other government preferences without fully measuring the costs and benefits.

Congress has a poor track record when it comes to mandating rules for technological development. Selection of the ‘winner’ in the biofuel game should be left to free market competition. If biofuels are to succeed as a competitive fuel source, congressional legislation should not be necessary to mandate its production. Congress should not force specific technologies on Americans, especially if they are unproven technologies. Instead, congress should allow the power of free enterprise to determine the outcome, letting researchers and the markets choose the best new viable alternatives. Federal mandates limit choices and interfere with ability of free enterprise to find the most efficient, cost-effective solution. As we have seen many times in the past, the high costs of ill-conceived energy plans will be passed on to the public and then nobody wins.

Tomorrow we will explore the other draconian life-style changes mandated by the Energy Independence and Security Act.

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