Trump’s Executive Order: Promoting Energy Independence and Economic Growth
By SBE Council at 29 March, 2017, 7:52 pm
by Raymond J. Keating-
Throughout its eight years, the Obama administration was relentless in its opposition to carbon-based energy resources, leading many observers to refer to a “war on coal” and a “war on energy.” That war is coming to an end. Not only has President Trump reversed the Obama White House by approving the Keystone XL pipeline and the Dakota Access Pipeline, but also by signing an executive order that begins the process of rolling back the Obama “Clean Power Plan” (CPP).
The CPP would force power plants to reduce CO2 emissions by 32 percent by 2030 compared to 2005 levels. When the CPP was released in 2015, SBE Council’s Center for Regulatory Affairs (CRS) published an analysis that ran down the variety of ways that the CPP would harm small businesses. As summed up:
“In the same overreaching manner as the Affordable Care Act (healthcare) and Dodd-Frank (banking and financial services), the Clean Power Plan (CPP) will impose billions of dollars in compliance costs, ultimately borne by small businesses, threatening their competitiveness and ability to innovate, and further cementing the economy’s stagnation. All of this is supposedly being done to fight climate change, yet the rule will have no meaningful impact on it whatsoever.”
In a March 29, 2017, editorial, The Wall Street Journal explained: “The [Trump executive] order directs the Environmental Protection Agency to review the Clean Power Plan, which the Supreme Court stayed last year in an extraordinary rebuke. The plan essentially forces states to retire coal plants early, and the tab could top $1 trillion in lost output and 125,000 jobs, according to the American Action Forum. Also expected are double-digit increases in the price of electricity—and a less reliable power grid. All for nothing: A year of U.S. reductions in 2025 would be offset by Chinese emissions in three weeks, says Rice University’s Charles McConnell.”
The Journal added, “It’s true that market forces are reducing coal’s share of U.S. electric power—to some 30% from about 50% a decade ago—thanks mainly to fracking for natural gas. Yet Mr. Obama still deployed brute government force to bankrupt the coal industry. Mr. Trump is right to end that punishment and let the market, not federal dictates, sort out the right energy mix for the future.”
Given the dynamism of free markets and innovation, writing off U.S. coal no matter what happens with the CPP – as some who favor the CPP have been doing in recent days – amounts to either thinly disguised politics or a striking case of presumptive arrogance.
What’s In the Executive Order?
As the White House reported, the executive order “directs the Environmental Protection Agency to suspend, revise, or rescind four actions related to the Clean Power Plan that would stifle the American energy industry.”
The order “directs the Attorney General to seek appropriate relief from the courts over pending litigation related to the Clean Power Plan”; “lifts the ban on Federal leasing for coal production”; “lifts job-killing restrictions on the production of oil, natural gas, and shale energy”; “directs all agencies to conduct a review of existing actions that harm domestic energy production and suspend, revise, or rescind actions that are not mandated by law”; “directs agencies to use the best available science and economics in regulatory analysis, which was not utilized by the previous administration”; and “disbands the Interagency Working Group (IWG) on the Social Cost of Greenhouse Gases.”
That last step is important for a variety of reasons. In a 2014 column, I wrote about the problems presented by the Obama administration’s attempt to create an estimated social cost of greenhouse gases:
The administration’s “Interagency Working Group” established a cost estimate called the “social cost of carbon” (SCC) to measure the benefits of reducing carbon emissions. According to a May 2013 White House document, the SCC is an attempt to estimate the monetary damages “associated with an incremental increase in carbon emissions in a given year.”
In comments filed with the Office of Information and Regulatory Affairs in late February, eleven public policy and interest groups – including the Competitive Enterprise Institute, the Science and Environmental Policy Project, and the Small Business & Entrepreneurship Council (for whom I serve as chief economist) – explained numerous problems with the SCC estimate.
In the comments, the groups summed up: “The social cost of carbon (SCC) – the damage allegedly imposed on society by an incremental ton of carbon dioxide (CO2) emissions in a given year – is an unknown quantity. It cannot be discerned in either meteorological or economic data going back a century and more. SCC analysis is too speculative to serve as a basis for regulatory justification. By fiddling with non-validated climate parameters, made-up damage functions, and below-market discount rates, SCC analysts can get almost any result they desire.”
That’s troubling, to say the least. But what’s the point? The groups noted that “SCC analysis, when used to influence public policy, is computer-aided sophistry. Its political function is to make renewable energy look like a bargain at any price, and make fossil energy look unaffordable no matter how cheap.”
U.S. Energy is All About Small Business
These policy changes from the Trump administration are good news for small businesses as energy consumers and as key players in energy sectors. As SBE Council has noted before, U.S. energy is overwhelmingly about U.S. small businesses. Consider that in 2014 (latest Census Bureau data):
• 90.2% of employer firms among oil and gas extraction businesses had less than 20 employees;
• 77.5% of employer firms among drilling oil and gas wells businesses had less than 20 workers,
• 80.7% of employer firms among support activities for oil and gas operations businesses had less than 20 employees,
• 59.2% of employer firms among oil and gas pipeline and related structures construction businesses had less than 20 workers,
• 52.9% of employer firms among oil and gas field machinery and equipment manufacturing businesses had less than 20 employees,
• 61.5% of employer firms in the coal mining sector had less than 20 workers,
• 67.3% of employer firms among support activities for coal mining businesses had less than 20 employees,
• 53.9% of employer firms among petroleum and coal products manufacturing businesses had less than 20 employees.
This recent major step is a welcome and important shift in U.S. energy and environmental policies. Other steps would include legislation from Congress that rein in widespread regulatory abuses emanating from assorted federal agencies, including, but not limited to, the EPA. The U.S. House has passed a variety of sound bills that reform the entire regulatory process, make that process more transparent and inclusive, and restore other checks to bring balance and reason to how and how much the federal government regulates.
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP: The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.