The latest annual report by British Petroleum on Greenhouse Gas (GHG) emissions once again serves to remind us that the previous administration’s so-called Clean Power Plan (CPP) may simply have been an attempt to claim credit for what the (somewhat) free market was already achieving. The report was distilled to a single picture by the American Enterprise Institute:
You may recall that President Obama’s CPP was intended, in the words of former EPA administrator Gina McCarthy, to show America’s “climate change leadership.” She did not dispute that the massive regulatory plan — which few actually understood — would do virtually nothing to reduce global temperatures. Its legality was soon crippled by the U.S. Supreme Court when, for the first time in our nation’s history, the high court stayed a rule before the lower court had considered it. Nevertheless, America’s GHG emissions, which had already been declining well before Ms. McCarthy’s ill-advised rule was even conceived, are continuing to decline unabated by the Supreme Court’s stay.
The graph shows that the U.S. is the world’s leader in reductions of GHG, which is in sharp contrast with China, whose increase in GHGs is more than three times our decrease. The standard response from some will be that the U.S. is still a disproportionate emitter of GHG on a per-capita basis. (Canada is the world’s leader in this statistic.) Others will counter by pointing out that the U.S. GHG emissions on a per-GDP basis — a measure of our carbon efficiency — is better than the international average.
What is important is that the (somewhat) free market has created these reductions without the aid of an undoubtedly illegal government intervention into our electricity industry. Thanks to the historic development of hydraulic fracturing, or fracking, natural gas prices have made baseload electricity generation using natural gas economical in many cases.
While markets still work even with governmental restrictions, such a market cannot be described as completely “free.” Of course, many restrictions exist in the power market, but two in particular have also contributed to the increased use of natural gas at the expense of coal in our country. First, significant regulatory hurdles have been placed on coal-fired power plants. Regardless of your preference, a number of EPA rules have made coal power more expensive. This has contributed to the fact that newly constructed electricity generating facilities are fueled by natural gas.
Second, mechanisms are now in place that force utilities to preferentially purchase power from solar and wind facilities. For example, heavy subsidies for solar and wind generation, such as production tax credits, lower the net cost of this power to below that of some coal and nuclear plants. In other cases, such as in North Carolina, public utilities commissions have forced utilities to purchase any and all power produced from certain sized solar and wind facilities whether it is cheaper or not. These are policy decisions intended to foster the development of high-cost electricity generation that would not otherwise be funded. Both of these mechanisms lead to revenues being cannibalized from coal and nuclear generators and force utilities to purchase more quick-response natural gas generators to maintain a stable grid. In turn, this has led to the need to build more pipelines. But given these restrictions, states are moving forward with market-driven choices.
The Clean Power Plan would have been an additional restriction on the market that would have forced more coal, and even some nuclear closures, that would not have otherwise been made for economic reasons. The CPP was not authorized under the law, and, despite protestations to the contrary, would have taken many of the decisions out of the hands of states and into those of the federal government. For now, those state-level decisions are leading to significant reductions in GHG emissions and at lower costs to ratepayers
Donald van der Vaart is a senior fellow at the John Locke Foundation and the former secretary of the North Carolina Department of Environmental Quality. These comments are the opinion of the author and do not necessarily express the position of the John Locke Foundation.
