The White House continues its aggressive economic stimulus program by issuing ever more stringent controls over energy use, which it claims will bring great benefits to the nation for years. Unfortunately, the benefits are largely illusory and the costs are significant.
Consider one new, relatively small, final regulation just issued that will not take effect until 2016. The Department of Energy’s Energy Conservation Program: Energy Conservation Standards for Standby Mode and Off Mode for Microwave Ovens (10 CFR Parts 429 and 430) claims it will produce, over its 30-year life, 2016 to 2045, benefits of $3.38 billion (using a 3% discount rate) in contrast to a cost to the microwave industry of only $96.6 million. That is, the regulation supposedly produces 35 times more economic benefits than cost.
How is this economic wonder achieved? The cost side is relatively straightforward. Microwave ovens will be more expensive as they are retooled to use less power while sitting unused. DOE estimates manufacturers will lose about 7% of industry net present value due to higher costs and lost sales (the $96.6 million) — a substantial loss.
According to DOE, however, that loss in industry value is swamped by the benefits. Over 30 years, microwave users will use less electricity, so 38.11 million metric tons less of CO2 will be emitted (other emissions will also drop, but that is not where DOE says the money is).
The Social Cost of Carbon (“SCC”) from reduced CO2 emission is worth as much as $3.615 billion (at a minimum, it is $255 million, still much higher than cost). SCC was developed by an “interagency process” that determined that the value of a ton of CO2 should, as of 2013, be somewhere between $12.6 and $119.1 per ton, up substantially from the old 2010 SCC values of only $6.2 to $78.4 per ton.
This regulation drew particular attention as it is apparently the first to employ the new higher value of CO2 emissions. The problem is that the “value” of CO2 non-emissions is not based on anything other than the imagination of bureaucrats. Because there is no market for such emissions, no price exists except in the minds of the central planners who have divined a “price” from speculation. The real and measurable cost will be higher-priced microwaves (which will primarily impact lower-income people) and the attendant higher costs and lower sales incurred by industry.
The 4% Growth Project will continue its exploration of the relationship between energy regulation and economic growth by hosting a major energy conference on September 12, 2013, at the George W. Bush Institute in Dallas, Texas. Stay tuned to www.fourpercentgrowth.org for further details and continuing analysis.
Quick Take: What France's Presidential Election Means
Matthew Rooney, director of the George W. Bush Institute’s Economic Growth Initiative, gives his overview of the election of Emmanuel Macron as France’s new president, focusing on what the election means in terms of the heated international debate over protectionism versus liberalizing trading relationships.
NAFTA SOS: In Defense of a Good Deal
A look at how NAFTA creates benefits for the United States, Canada, and Mexico, including beyond trading relationships
Políticas de Renegociación para Fortalecer al TLCAN/NAFTA
El Tratado de Libre Comercio de América del Norte no es perfecto. Se han hecho muchas concesiones y la implementación de dicho tratado tuvo efectos variados en los tres países. La manera de lograr un balance positivo es abordando las desventajas para encontrar posibles soluciones.
NAFTA Renegotiation Policies That Will Strengthen North America
The administration’s promised action on NAFTA will likely begin this year. The Bush Institute's policy recommendations for strengthening North American economic competitiveness are a good reference point for what ideas should be brought to the table.