April 2011

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RGGI: A Republican, Pro-Market Initiative

by Peter Bearse

 

As a Tea Party Republican activist and 2010 Conservative Republican Candidate for Congress, I first want to congratulate my GOP colleagues who have supported retention of New Hampshire’s participation in the 10 eastern states’ Regional Greenhouse Gas Initiative (RGGI). These Members of the NH General Court include our very own Seacoast State Senator, Nancy Stiles, and the Senate Majority Leader, Jeb Bradley. They are true political leaders for speaking out as a minority within the Republican majority who voted to repeal RGGI. They need but five (5!) more Senators to join them to maintain RGGI here in our state.

 

Writing also as an economist, let me set forth some major reasons why my other Tea Party and Republican friends should join the campaign to amend, improve and maintain RGGI in NH rather than acting as if to “throw the baby out with the bath water.” Some of these are new to the debate  and not brought forth during oral testimony on the RGGI repeal bill, HB 519-FN [I waited several hours for a chance to testify but then had to go to another hearing, and so left a written copy of my testimony with the clerk of the presiding Science, Technology and Energy Committee]. Consider:

 

ü      RGGI represents a conservative, pro-market concept of how to handle harmful emissions that power plants typically discharge into air or waters.

 

ü      RGGI has been initiated and/or implemented by the GOP governors of several states, including Governors Pataki (NY), Schwarzenegger (CA) and Huntsman (UT),

 

ü      At very low cost to business and residential users of electricity, [e.g., little more than a penny a day for a typical residential user), RGGI generates over $34 million dollars in revenue for NH -- revenue that has been used both to help finance energy conservation statewide and to balance the state budget.

 

ü      The RGGI approach to “cap’n trade” is far simpler, more direct, less expensive, and far less centralized and susceptible to political game-playing and corruption than the extremely cumbersome federal government approach proposed in the Congress [which I opposed].

 

ü      Though RGGI is only a modest first step in the long-run battle to reduce the adverse impacts of both climate change and foreign sources of energy, it has spurred those with anti-science attitudes to come out in force. Republicans gain no credit for reinforcing the scientific illiteracy of the public-at-large, especially in a situation where the evidence of global warming and climate change [GW/CC] is substantial and the science is sound.

 

 What “harmful emissions” you ask? -- Those carbon-based emissions that have been declared harmful in a Supreme Court decision that affirmed EPA’s power to regulate them. To hell with an “activist” (actually, majority-conservative) Supreme Court, you say? How is our over-dependence upon foreign oil not harmful to both our economy and national security (among many other indices of harmfulness)?

 

“Scientific illiteracy,” you claim? Yes, because most people don’t understand the nature of the scientific enterprise -- even though science-based entrepreneurship and economic development has become the prime driver of job creation and American competitiveness worldwide. Yet, one State Rep. was heard to say, proudly:  “A couple of Ph.D.’s testified in favor of repeal.” Indeed,  just as a minority of scientists can still be found to testify against evolution. Where is the weight of the evidence? -- in favor of GW/CC. Are there dissenters? -- Of course, as in any branch of science. If a claim cannot be disproven, it is not scientific. The evidence favoring GW/CC continues to mount, while the evidence disfavoring is insufficient to disprove.   

 

RGGI is a “conservative, pro-market” approach, you claim? How so? Here, it helps to know how markets work, too. They work well only if they are private and competitive, with all inputs and outputs fully priced. If the latter are not priced, they are called “externalities” because, as in the case of pollutants, they impose costs that are not included in product prices. Thus, RGGI is a market-perfecting device because it puts a price on carbon. Most conservatives would acknowledge that an approach that helps perfect the market is conservative because, as Adam Smith recognized, a private, competitive marketplace honors conservative values.

 

Besides the “externalities” introduced earlier, there is also the market and political power exercised by the biggest, multinational oil companies. These firms have received, and continue to receive, substantial subsidies from the federal government. Yet, one should question where the latter’s loyalties lie when the revenues of so many are now mostly generated outside the U.S.  RGGI is focused on what’s good for NH.

 

Nevertheless, both opponents and supporters of RGGI recognize the need to amend the RGGI enabling legislation. The shared concerns focus on the letting of energy-efficiency contracts through the Public Utility Commission [PUC]. These concerns are justified. The letting of large contracts to big companies who have been insiders to the RGGI process gives the appearance of favoritism rather than a competitive selection process.  One part of the solution to this problem would be establishment of a citizens committee independent of RGGI, Inc., the PUC and the legislature -- to issue requests for proposals and select the best projects on a competitive basis. This would also help reinforce the energy efficiency incentive features of RGGI. Most of the NH companies in the renewable energy arena are new, small, innovative and competitive.

 

So, we can increase incentives for both carbon reductions and energy efficiency -- as long as we don’t start by “throwing the RGGI baby out with the bureaucratic bathwater.”

 

            PETER BEARSE, Ph.D., International Consulting Economist, March 5, 2011. Reply to pjbearse@gmail.com or to this media outlet.