Senator Bingaman’s Clean Energy Standard a Lose-Lose for Economy and Environment

Published in National Journal Energy & Environment Experts Blog

A national clean energy standard will be a setback for our recovering economy because it will displace traditional energy sources with more costly, undeveloped and inefficient energy sources. Energy use and economic growth go hand in hand. In recent years each 1% increase in GDP in the U.S. has been accompanied by a 0.2% increase in energy use. Higher energy prices tend to slow economic growth and reduce the competitiveness of U.S. manufacturing and other sectors as well.

As policymakers confront the slow U.S. economic recovery and slow job growth, they need to consider the impact of tax, budget and regulatory decisions that promote the use of renewable energy compared to the expansion of conventional fossil fuels or nuclear power electricity generation and for transportation.

Economic analyses show that costs of renewable energy run high than traditional energy sources. Data on electricity prices in states with renewable portfolio standards (RPS) show that they experience higher costs for electricity those without an RPS mandate. In 2011, the 29 states with an RPS mandate faced residential electricity prices that were 27% higher than those without a mandate and industrial electricity prices were 23% higher (see Figure 2 of ACCF testimony).

Additionally, a national mandate requiring that electricity retailers supply a specified share of their sales from clean energy sources would have adverse economic impacts. A December 2011 EIA analysis shows that by 2035, the Bingaman CES will raise electricity prices by 20% to 27 % and reduce GDP by $124 billion to $214 billion. Despite the higher levels of federal support and economic costs of supporting renewable energy, the impact on reducing GHG concentrations in the atmosphere will be minimal since the real growth in emissions is coming from developing countries or to make material improvement to the U.S. mortality rate. In addition, as described above, renewable energy is not without its own negative environmental and social impacts. By encouraging the deployment of energy technologies that are more expensive than conventional energy, consumers and industry are forced to spend more on energy and have less for other purchases or for productive investment. As a result, GDP and job growth will be lower than otherwise as resources are diverted from their highest and best use. While the intentions of Senator Bingaman are honorable, a federal clean energy standard will be a lose-lose for the U.S.—environmentally and economically.