Last summer, Washington State had the dubious distinction of having the highest average gasoline prices in the nation — even higher than California’s. Although it has now slipped back to second place behind California, the state’s cap-and-trade program for carbon emissions will continue to raise energy prices. Already estimated to have increased by 45 cents per gallon this year thanks to a cap-and-trade program modeled after California’s, the price of gasoline will increase even more as the quantity of carbon “allowances” is reduced over time — to zero by 2035.
Washington is also mimicking California’s green energy policies in other ways — banning the sale of new internal-combustion vehicles by 2035; adopting a “clean fuels” standard that requires refineries and fossil fuel sellers to reduce emissions by producing high-cost biofuels, such as diesel from used French-fry oil; banning natural gas furnaces and appliances in new homes; and forcing its electric utilities to generate nothing but zero-emissions electricity.
Oregon has adopted a “me-too” approach, adopting all of Washington state’s energy policies with the exception of the cap-and-trade program (which escaped only because the Republicans in the state legislature walked out, preventing a quorum).
Will these green energy policies “fight climate change,” as Governor Inslee claims? Hardly. Together, Washington and Oregon’s greenhouse gas emissions are less than one day’s worth of world energy-related carbon emissions. So, even if the two states could reduce their carbon emissions to zero tomorrow, it would have no measurable impact on world climate.
But while the states’ policies won’t affect the climate, they will inflict significant damage on their economies, with their lower-income residents being harmed the most. Although the states trot out studies purporting to “prove” that their green energy policies will increase economic growth and create thousands of new jobs, the observed reality is far different. In Europe, for example, green energy mandates have led to skyrocketing energy costs, greater energy poverty, and deindustrialization, as energy-intensive manufacturers abandon Europe for countries with lower energy costs.
Consider the impact of gasoline price increases, which are estimated to have increased by at least 45 cents per gallon because of Washington’s cap-and-trade program. The increased costs for gasoline and diesel fuel increase the costs to transport goods — everything from delivering flowers to long-haul trucking. And the resulting $1.1 billion increase in household and business expenditures on gasoline and diesel fuel means they’ll have that much less to spend on other goods and services.
Requirements for zero-emissions electricity and “renewable” natural gas (which is far more costly than traditional natural gas supplies) will have a similar impact. Businesses will encounter higher electric and natural gas bills, forcing them to increase their prices, reduce output, or both. Those impacts will lead to job losses, which will in turn further reduce consumer spending — causing even greater economic losses. Consumers will be forced to cut back on their expenditures in order to pay for higher-cost energy, further damaging the states’ economies.
Ideally, the two states’ energy policies would instead focus on common sense policies by emphasizing market-based approaches that eliminate burdensome mandates and subsidies; and providing low-cost, reliable energy supplies, especially emissions-free nuclear power. For example, if electric vehicles (EVs) are truly a superior, less costly, technology, then consumers will adopt them without the need for mandates or costly subsidies.
Unfortunately, however, the two states’ current policies to promote green energy and reduce greenhouse gas (GHG) emissions have nothing to do with common sense or basic economics. Instead, the policies in place are diverting scarce resources to favored constituencies, such as wind and solar developers.
The end result of these ill-conceived energy policies is this: the vast majority of Oregon and Washington state residents and businesses are likely to suffer increasingly painful economic and social losses that will have little or no benefits.
Jonathan Lesser is the president of Continental Economics and a Senior Fellow with the Discovery Institute in Seattle. This article is adopted from his new study, “All Pain, No Gain: The Economic and Social Consequences of Green Energy Policies in the Pacific Northwest.”