As we approach the three-year mark of President Biden’s Joe term, consumer prices have risen more than 17% under his watch, driven in large part by a 32% surge in energy costs.
American energy security is vulnerable to our teetering electricity grids and the belligerence of Russia and Iran pursuing higher oil prices to fund their wars.
And yet, American energy production has only recently recovered to pre-pandemic levels. The culprit, of course, is the president’s trillion-dollar chief legislative accomplishment – the cynically-titled Inflation Reduction Act (IRA). Instead of deterring Russia and Iran, apparatchiks in the Biden administration use the IRA’s subsidies and tax credits to deter reliable, affordable energy investment, thereby compounding our security woes.
Last month, for example, the Department of the Treasury unveiled its long-awaited eligibility criteria for the IRA’s electric vehicle tax credit. China emits more than twice the carbon of the United States, but Treasury’s criteria made Swiss cheese of the IRA provisions that were designed to prevent the tax credit from subsidizing Chinese miners and mineral refiners.
So warped is Treasury’s approach that Sen. Joe Manchin, whose vote was crucial to enacting the climate law, has committed to “supporting any lawsuit” against it.
A similar subversion of energy security unfolded in the wake of the recent COP 28 climate confab, where the Biden Administration signed a pledge to triple nuclear energy capacity by 2050, in pursuit of net-zero emissions. Yet, less than a month later, federal bureaucrats bungled the roll out of the IRA’s hydrogen tax credit.
To favor the easier to construct wind and solar industries, existing nuclear facilities are denied this lucrative IRA sinecure, despite the fact that they reliably produce approximately 46% of America’s carbon-free electricity.
Amid the giddy haste to dole out taxpayer dollars to the administration’s favored industries, the hard work of crafting predictable safety regulations — which are fundamental to the success of any energy technology — has fallen by the wayside. While pipelines shuttle hydrogen within Texas and Louisiana, there are no clear rules for permitting interstate hydrogen pipelines.
Carbon capture technologies suffer a parallel challenge. The IRA supercharged subsidies to trap carbon emissions and store them.
In 2022, the Department of Transportation recognized that its carbon pipeline safety rules needed to be updated, but the task has been put off until late 2024. Rather than moonlighting as fiscal central planners, federal bureaucrats must prioritize their most crucial regulatory responsibilities.
The IRA suffers the same arrogance as all socialist master plans. The federal government lacks the information, incentives, and competence to achieve progressives’ utopian dream.
Top-down, command-and-control models didn’t work for Obamacare, and they don’t work for reliable, affordable energy.
Instead, we should embrace free-market capitalism that unleashes our Nation’s blessed abundance of energy. We must fully repeal the IRA’s energy and environment provisions and reintroduce a fiscally responsible “all of the above” America First energy policy that promotes competition and consumer choice, not distortionary tax credits.
In geographies as varied as Alaska and Florida, this strategy promotes the efficient use of America’s diverse natural resources, while abolishing the current one-size-fits-all green obsession.
Oil and gas drilling, nuclear, hydrogen, carbon capture, and, yes, electric vehicles, all have potential roles to play in America’s energy and transportation sectors and they should all be put to the test of the free market. Under the helm of our colleague, then-Secretary David Bernhardt, the Department of the Interior pursued this “America First, all of the above approach” in May 2020 when it permitted the then-largest solar project in American history.
As an act of central planning, the IRA is as inefficient as it is coercive. It manipulates consumer choice, picks winners and losers, and saddles future generations with the tab.
To deliver genuine energy security, boost the economy, and lower prices, the next America First administration should fully repeal the IRA’s energy and environment provisions in its first hundred days, coupled with the return of fair competition and a federal “all of the above” energy strategy.
Mr. Faulkender, PhD is chief economist of the America First Policy Institute and a professor of finance at the University of Maryland. He served as Treasury assistant secretary for economic policy, 2019-21.
Mr. McPherson-Smith, PhD is the Director of the Center for Energy & Environment at the America First Policy Institute and a research fellow at Stanford University’s Hoover Institution.
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