Budget Good Opportunity for Debate

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After much anticipation, President Obama last week unveiled his 2013 budget proposal.  Among other line items in the $3.8 trillion plan, the president recommended $27.2 billion in spending on energy initiatives, $2.27 billion of which would fund the Department of Energy’s Office of Energy Efficiency and Renewable Energy. This is almost 10% of the total energy budget.

The federal budgetary process presents a rare opportunity for the President and his administration to craft smart energy policy that is in the best interest of power consumers. But does the 2013 budget proposal do that? The answer, in our opinion, is both yes and no.

First, let’s give the president credit where it is due. The 2013 budget supports advanced manufacturing in the U.S. with $290 million for research and development that will help create more efficient industrial processes and materials. Clearly, a renaissance in American manufacturing will be at the center of our national economic recovery. The budget also provides $5 billion to extend the so-called 48c tax credit that spurs technology development in areas such as smart grid technology, energy storage technology, CO2 capture and sequestration, and energy conservation. These are important pieces to building our American future.

Often overlooked in the energy conversation, using electricity more wisely is perhaps the most important step we can make toward becoming more energy secure. That’s why PACE is pleased to see an 80% increase in dollars aimed at programs to promote energy efficiency in commercial buildings and industries. Empowering homeowners to use energy more wisely is also part of the energy equation, and the president’s budget helps make that happen.

It is also important that we enforce the environmental laws we do have, as opposed to creating new and costly layers of regulation. PACE has argued, for example, that nearly all of the so-called benefits calculated by EPA for its Utility MACT rule are actually the product of existing air rules and are not related to mercury reduction at all. That’s why we are pleased to see that states will receive a 10% hike in funding for enforcement of federal environmental rules. By enforcing the rules on the books, states can continue to achieve the sharp declines in emissions we have witnessed over the past two decades.

Now for the bad news. Sadly, in the wake of continued deficits and lingering unemployment, the president plans to continue subsidizing the wind energy industry at a cost of 2.2¢ per kilowatt-hour of electricity. The president also continues to fund a plan with the Department of Interior to build more renewable energy projects on public lands, with a stated goal of 11,000 gigawatts of capacity by the end of 2013. Both of these spending initiatives, in our opinion, continue to invest public dollars in energy sources that are neither reliable nor affordable, rather than allow those technologies to compete on their own merit. Both wind and solar energy are capable of offering much to America’s energy future, but funding those projects with private capital, rather than public subsidy, is a safeguard that will help ensure that those projects are financially viable ventures and not political boondoggles.

The president’s budget also includes increased funding for efforts to reduce greenhouse gas emissions. Likely to be part of this strategy is an effort by EPA to regulate greenhouse gases from the energy sector, an initiative supported legally by a 2007 Supreme Court ruling in Massachusetts v EPA. This means that the EPA, for the first time in its history, could begin regulating carbon dioxide as a harmful pollutant. Groups across the nation, including the Georgia Tea Party, have argued that this effort exceeds the purview of EPA and poses great economic risk by raising electricity rates and endangering the reliability of U.S. power.

While the president’s budget is far from perfect, we believe that it provides a platform for robust debate about our national energy priorities. Will we, for example, choose to cultivate market conditions in which the best energy sources compete to prove their worth to consumers? Or will we predetermine the winners and losers of tomorrow’s energy future through aggressive subsidies for only some and heavy regulation for others? These are questions that deserve debate and beg for answers. Let’s hope we get both soon.