Topic: Government Regulation
Energy Independence and Security Act A few months ago Congress and the President passed the Energy Independence and Security Act of 2007. Instead of relying solely on free market, Congress passed this act.by Adam Rink
(Libertarian)
Friday, February 22, 2008
A few months ago Congress and the President passed the Energy Independence and Security Act of 2007. This act requires automakers to have a fleet average of 35 MPG by 2020 for cars and light pickup trucks. This is an increase of 7.5 MPG from our current standard of 27.5 MPG which was set in 1985. Instead of relying solely on free market, Congress passed this act to help push automakers into the right direction. Unfortunately, it seems Congress went to Detroit and asked the major car manufacturers what they expect for fuel economy in twelve years, and then wrote the bill to meet those expectations. Right now, the average fuel economy in Japan is about 50 MPG and Europe averages about 43 MPG. Even when the new standards become effective in 2020, the US will still have a worse MPG average than these countries have right now.
Twelve or so cars meet or are near the proposed fuel standards. According to, fueleconomy.gov the following 2008 cars are close to meeting the new Energy Independence and Security Act standards.
Because of gas prices, new technologies have already been prototyped and developed. These technologies include hybrids, electric drive trains, clean diesels, plug-in hybrids, bio-diesel, ethanol, and direct injection engines. The price of gasoline has also led to new companies, like Telsa motors, Zap, and Fly the Road. These companies produce their own versions of electric cars.
It is estimated that the US subsidizes $3 per gallon with tax breaks, regulatory oversight, pollution cleanup, and liability. If you add in payments to foreign dictators and the aid to oil countries, one can argue the real price of gas is even higher. The US has sent almost $500 million in aid to Pakistan, and another $20 billion divided between Saudi Arabia, Qatar, Bahrain, Oman and the UAE. The Energy Independence and Security Act does not eliminate the $20 billion in oil subsidies.
Instead of subsidizing gasoline, thus; artificially driving down the cost, we should let it float on the free market. While $6 per gallon would be a big shock to the US economy in the short term, in the long run higher prices would force us to take larger steps towards solving our dependency on foreign oil and pollution problems. Being rid of oil might even allow the US to be uninvolved in unstable countries like Iran and Venezuela. If gasoline had never been subsidized, the solutions to these issues would be here today and they would have come about gradually. Instead, we are walking on eggshells and watching the US auto industry suffer.
The Energy Independence and Security Act demands a fourfold increase in alternative fuels like bio-diesel and ethanol. Alternative fuels will raise the price of food. Use of ethanol fuel will lead to food inflation by increasing the price of corn. Besides direct human consumption, corn is also used as livestock feed. Therefore, as corn prices rise, so does the price of meat.
However, the Energy Independence and Security Act does not mention the use of solar, geo thermal, nuclear and wind energy. Although, the argument could be made that by the Act's investments in green jobs and increasing loans to small businesses for help in reducing energy costs these alternative technologies are covered. Green jobs provide employees with skills to work in a renewable energy field, like a solar panel installer. It is interesting that big businesses do not get help, even though they are larger polluters. It seems like this provision creates an unfair advantage for small businesses.
The Energy Independence and Security Act bans the incandescent light bulb by 2014. Other new initiatives for conserving energy in buildings are also promoted. While many favor the end of the incandescent light bulb, does the Constitution give Congress this power? US government buildings must be upgraded to be energy efficient as well. Though, we would save more energy if our government was smaller. For instance, the military burns 395,000 barrels of oil each day.
There is a section in the Energy Independence and Security Act to provide American-based clean energy technologies to developing countries. Basically, our US government is financing other countries' power grids. To be fair, the Act does provide for an upgrade of the US grid as well. The US power grid is one area where Congress does have the authority to regulate and finance.
Personal and corporate conservation of energy is the cheapest and easiest way to reduce our dependency on foreign oil and decrease pollution. It is easier to carpool than to build an ethanol plant. It is easier to turn off a computer than to retrofit a building. The free market it is the vehicle that helps conserve, not the government. As price goes up, consumers will find ways to use less. The Energy Independence and Security Act assumes that the federal government knows best about solving America's energy crisis. In fact, states can better manage their own energy policies than the federal government. Each state has its own resources. Wyoming, Idaho and the Dakotas have lots of wind. Southern California, New Mexico and Arizona have lots of sun. The mid-western states have lots of corn and soy. It makes sense that each would have different ways of becoming green. Instead, the federal government is passing a one size fits all bill that the market place will far surpass by the year 2020.
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2008 Adam Rink, all rights reserved.
Published: Friday, February 22, 2008
Last modified: Friday, February 22, 2008
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2008 Adam Rink, all rights reserved.