6/27/00 5:20 p.m.
Al's Eco-Industrial Policy
Gore just doesn't trust the market.

By Jonathan H. Adler, author whose books include Ecology, Liberty & Property (2000)

ne week after Texas Governor George W. Bush attacked Vice President Gore for failing to have an "energy policy," Gore obliged. In a series of speeches this week, Gore is outlining an ambitious, multibillion-dollar scheme to steer the future course of energy markets from Washington, D.C. Speaking Tuesday in Philadelphia, Gore outlined part one of his plan: $75 billion in subsidies, tax credits and "incentives" for the development and use of alternative energy sources and cleaner industrial facilities. Later in the week, Gore will propose tax incentives for the purchase of low-energy appliances and more federal support for "alternative" forms of transportation. A hallmark of all these plans is an effort to use federal dollars and the tax code to reward favored industries and technologies at the expense of those that succeed in the marketplace.

A centerpiece of today's announcement is $68 billion in incentives and support for modernization of electricity production to both reduce emissions and increase the reliability of the electric grid. According to Gore, it will help the environment and the economy if Uncle Sam decides which electricity projects are worthy of financial support. Gore is right to note that there are opportunities to reduce emissions and improve economic performance at the same time, but federal subsidies are not the solution. The problem is not lack of financial incentive, but regulatory proscriptions that impede the development and deployment of new industrial processes and techniques.

Under existing regulations, older facilities are "grandfathered," and are subject to fewer regulatory requirements than newer ones. Building a new plant, or upgrading an existing one, exposes a company to a broader and more stringent set of federal rules. As a result, utilities and other companies that wish to upgrade and clean up older facilities face a labyrinth of regulatory obstacles and paperwork requirements. Around every turn lies the risk of permit denials or harassing citizen suits. It's no wonder that many companies shy away from modernizing existing plants in favor of other investments. As I have argued elsewhere, the surest way to encourage economically sensible investments in cleaner technologies is for the federal government to get out of the way and allow markets to work — but that's something Gore just doesn't know how to do.

As a member of the Senate, Al Gore had the most anti-market voting record of anyone, according to the since-discontinued Competitive Enterprise Index. Despite his reputation as a moderate, Gore rarely, if ever, saw a problem that didn't call for more government regulation (except, perhaps, for exempting Tennessee's Tellico Dam from the Endangered Species Act). So, too, with energy. Rather than drain the regulatory swamp so companies can innovate and excel, Gore wants to channel their efforts into another layer of federal bureaucracy. This is no way to encourage innovation, nor is it a sound approach to protecting our environment.

Postscript
In a commentary published last Thursday on National Review Online, Gas Pains II, I criticized Gov. Bush for failing to note Vice President Gore's consistent support for higher taxes on fossil fuels, both as best-selling author and Vice President. At the time, Bush had merely criticized the Vice President's lack of an "energy policy" — something the Veep is now putting on the table. Last Friday, however, Gov. Bush and his campaign began noting the Vice President's support for energy taxes, quoting Earth in the Balance and Gore's political record.