Anti-Environmental Regulation

by Reihan Salam

Brad Plumer of The New Republic has written a shocking report on how federal and state regulations lead to perverse environmental outcomes.

Casten’s original plan was to sell one-third of the recycled power to Cabot’s plant, and the rest to an industrial facility just down the road for around $45 per megawatt-hour–cheaper than the $55/MWh that electricity cost in the area, yet still high enough for the project to be profitable. But, in Louisiana, as in most of the United States, state law forbids anyone from stringing up private wires across a public street. Casten couldn’t market his power directly–he could only sell it to the local electric utility. And, because the utility, due to state rules, chiefly earned a profit from the power plants it built and ran itself, it refused to offer anything more than rock-bottom prices for Casten’s recycled power–prices too stingy for the project to work. After many months of bitter wrangling, Cabot gave up entirely. As a final insult, the utility later won approval from regulators to build a brand new fossil-fuel plant, a pricier way to generate electricity that would also add more carbon to the air.

The Louisiana utility wasn’t doing anything evil–it was just responding rationally to the rules laid down–but the end result was perverse. “It’s like we’re forcing citizens to pay extra to heat the planet,” Casten bristles. And similar roadblocks stand in the way of recycling across the country, with jaw-dropping consequences: One study for the EPA found that harnessing industrial waste energy had the potential to meet 19 percent of the country’s electricity needs–equal to 95 nuclear plants–while slashing fossil-fuel use in the power sector by one-quarter.

Plumer offers a number of recommendations, including the elimination of barriers to local generation. One wonders how far we could get in promoting energy efficiency and curbing carbon emissions by simply eliminating counterproductive regulations rather than creating new regulations.

The Agenda

NRO’s domestic-policy blog, by Reihan Salam.