Six energy-policy reforms conservatives should embrace

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The U.S. House demonstrated last week that the politics of climate solutions remain intractable. With bipartisan support, lawmakers overwhelmingly passed a resolution describing a carbon tax as, “not in the best interest of the United States.”

While R Street considers the vote to be an unwise obstacle to future debate on how best to repeal damaging Environmental Protection Agency regulations, it’s clear the appetite for legislative activity explicitly to rein in carbon emissions isn’t yet here.

Supporters of a carbon tax tout the incentive for innovation such a tax would provide. But even without an explicit price on carbon, there’s plenty for Congress to do. Our cumbersome, piecemeal energy policies hold back competition, creativity and progress. While many Republicans are understandably skeptical of plans to layer a carbon tax on top of this quagmire, cleaning out the muck and modernizing our energy sector will ensure the market is better equipped to deal with a carbon-constrained future.

American energy policy largely was devised when the United States feared energy scarcity and mainstream renewable alternatives were too risky and expensive to attract investment. These policies are now hopelessly outdated. American ingenuity in oil-and-gas development has caused a worldwide oil glut and wind-and-solar executives now say they can do without government subsidies. There are a few obvious places to start to clean up energy policy, and none of them have to do with carbon.

Here are six items the House and Senate can take up to make energy markets healthier, expand consumer choice and get government out of the way of our innovative energy sector.

  • End tax extenders once and for all. The threat of renewable tax extenders has again reared its head. Energy tax extenders include provisions for biodiesel, residential energy equipment, electric vehicles and a dozen other special interests, which amount to $7.4 billion in lost revenue this year alone. Cutting these is a great start, but Congress can go further and strip out energy incentives across the board that have found a permanent home in the tax code. Sure, we can quibble about which tax provisions are special breaks for energy, but Congress can and should put a stop to wasteful, unnecessary, market-distorting spending across the energy sector.
  • Curb the Department of Energy’s efficiency standards. The DOE establishes minimum efficiency standards for more than 50 categories of appliances that Americans use in their households and businesses. Operating under statutory authority granted when the United States was plagued by concerns about energy scarcity, the DOE uses these standards to ensure that appliances don’t use more power than needed. But the standards also limit consumer choices and restrict the availability of appliances that are inexpensive and reliable. Labeling programs, like the EPA’s Energy Star, enable consumers to make informed choices without taking preferred products off the shelves. It will take Congress to stop the continuous flood of new standards.
  • Repeal the Renewable Fuel Standard. Initially conceived as a policy to replace imported oil with domestically produced ethanol from agricultural products, the RFS is now a prime example of unintended consequences. The fuel-blend requirements cannot be achieved without sacrificing the safety of older engines; diverting agricultural products to the fuel supply has increased food prices; ethanol is more expensive and less energy dense than gasoline; and elevated prices for corn are converting more and more prairies and wetlands to agricultural products, sacrificing conservation goals. The House and Senate have conducted seven hearings on the RFS since 2014, but have not yet taken action to reform substantially or eliminate completely this wasteful program.
  • Extend Master Limited Partnerships. The MLP structure is unique, in that it allows pass-through partnerships to be traded publicly. They’ve enabled oil-and-gas companies that engage in exploration, development, mining, production, processing, refining, transportation or marketing to attract capital and drive investment. But a lot of other energy sources have income streams akin to oil and gas. Hydro, wind and solar, among others, are all intuitively similar to pipelines (the most common type of energy MLP) in that they are capital-intensive but passively involved in generating business income. It’ll take an act of Congress to allow the IRS to extend this tax structure beyond the exclusive list of what qualifies today.
  • Cut environmentally harmful spending. Green Scissors – a coalition of Friends of the Earth, Taxpayers for Common Sense and R Street – has identified tens of billions of dollars in annual wasteful spending across public lands, energy, transportation, insurance and agriculture. The coalition’s report offers an itemized list of provisions that should be repealed to clean up the environment and shrink the size and reach of government.
  • Streamline siting and permitting for critical infrastructure. Regulatory requirements designed to protect Americans and the environment have grown so burdensome that they restrict our ability to make necessary investments in energy infrastructure. Congress has advanced several necessary provisions to improve these requirements, especially in streamlining the permitting -approval process for modern hydroelectric facilities and siting needed pipeline infrastructure for clean-burning natural gas. The slow approval process for energy facilities tethers the U.S. economy to old and dated technology and infrastructure; it’ll take Congress to move us into the future.

The House and Senate are about to go to conference on a sweeping energy package for the first time since 2007. The appetite for energy legislation is greater than it’s been in a decade. If that momentum can’t be focused to limit the EPA’s damaging regulatory overreach in carbon, it should push for commonsense steps that will encourage the market to solve our biggest energy challenges.

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