Best Way to Effect Change in Energy Markets: Markets or Government?
During last nightâ€™s Democratic presidential debate, Senator Bernie Sanders remarked that the reason climate change has not become an issue at least among many Republican candidates is that they are recipients of large fossil fuel donations. Is there a correlation? What separates the candidatesâ€™ positions?
While it has become a more partisan issue in recent years, the oil, gas and coal lobbies have given the preponderance of their political donations to Republicans and the green lobby has given much of their monies to Democrats. But there are plenty of Republicans at both the state and national levels who support renewable energy and whose local economies depend on such development. Ditto for Democrats and fossil fuels. At its most essential level, though, it is a question of whether markets or governments are best equipped to address the matter.
The issue has only become more divisive as the voices on each side of the climate change debate have become more strident: One side is saying that the planet is doomed unless there is immediate action to wean ourselves off of fossil fuels while some are denying that global warming is even a human-induced event. Others, meanwhile, are saying that the matter is not as dire as some would predict while cautioning against trillion-dollar initiatives to fix it.
Given that context, both former Secretary of State Hillary Clinton and Senator Sanders, D-Vt., have embraced the scientific findings saying that global warming is real and a threat to the globeâ€™s well-being. But each has a different way to arrive at a solution:
Clinton would continue with the current regiment of providing tax breaks to wind and solar, which have each received an extension to 2019 and 2012, respectively, that is expected to promote their expansion. To this end, the solar industry employs nearly 174,000 in this country â€” people who are provided a living wage, says the The Solar Foundation. The American Wind Energy Association puts the number of wind-related jobs here at 73,000, and growing.
Sanders, on the other hand, is more in favor of a carbon tax whereby government would tax utilities according to their carbon footprints. It is something that can be easily measured and it is something that would have an immediate effect on carbon releases. Interestingly, many conservative thinkers support this methodology as well, including former Secretary of State of George Schulz during the Reagan administration.
â€śThe producers don’t bear that cost, society does. There has to be a way to level the playing field and cause those forms of energy to bear their true costs. That means putting a price on carbon â€¦That is, you distribute all the revenue from the carbon tax in some fashion back to taxpayers, so there is no fiscal drag on the economy,â€ť Shultz concludes, during an earlier public forum.
A joint report issued by the Brookings Institution and the American Enterprise Institute says that pricing carbon is the most efficient way of reducing carbon dioxide releases that are tied to global warming. A $16 tax per ton would raise $1.1 trillion in the first 10 years.
In the early days of the Obama administration, the discussions centered on a cap-and-trade system, where carbon ceilings are set and utilities must meet them, or buy credits that allow them to exceed such limits. But those debates occurred after President Obama came to Washington and when his party controlled both legislative chambers. When the Republicans took over the U.S. House in 2010, those ideas died.
Under the now-blocked (temporarily) Clean Power Plan, the states would have the latitude that they will need to reduce their emissions â€” anything from burning cleaner fuels to installing modern technologies to trading credits. The Northeastern region as well as California have established such trading designs. The monies they collect from selling carbon credits are reinvested back into renewable technologies.
The Republicans, by contrast, would effect change by allowing free markets to function. In other words, trying to tilt the playing field to favor green energies at the expense of proven fuels that are still in demand creates inefficiencies. If the prices of wind and solar were to fall without subsidies, then the presidential candidates say that such market forces should prevail.
Until then, though, those candidates will point out that the oil and gas companies provide more than 9 million jobs in this country â€” something that moves the economic needle more than commerce in the green fields.
â€śWeâ€™re not going to destroy our economy the way the left-wing governmentâ€ť would have us do, said Senator Marco Rubio of Florida, during one of the debates. His opponent, Senator Ted Cruz, D-Texas, generally agrees and says that global warming is a hoax. Others, such as Donald Trump and Jeb Bush, have acknowledged the science but say that free markets should be allowed to work.
The topic of climate change has become highly politicized. But addressing potential solutions should be welcomed in the public square â€” everything from using governmentâ€™s levers to allowing consumers free choice, or some variation of each one. In reality, energy markets have always been a function of hybrid policies, regardless of how the political parties portray it.
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