Does NC Need An Energy Policy? | Eastern North Carolina Now

    Publisher's note: This article appeared on John Hood's daily column in the Carolina Journal, which, because of Author / Publisher Hood, is linked to the John Locke Foundation.

    RALEIGH     Does North Carolina need an energy policy? In my view, it depends on what you mean by the phrase.

    If by "energy policy" you mean a detailed plan of requirements and timetables for producing and distributing electricity and fuel in proportions set by government fiat, then the answer is a resolute no. Although the power grid itself will for the foreseeable future be dominated by regulated monopolies, there is no more need for government to attempt central planning of the energy sector than there is for government to attempt central planning of any other sector.

    On the other hand, if by "energy policy" you mean an overall goal for the state, then the answer is an unambiguous yes. Policymakers should set North Carolina's regulatory and fiscal policies to maximize the availability of affordable energy while ensuring against clear and significant harms to public health and safety.

    In other words, North Carolina should aspire to have the lowest-possible energy prices consistent with environmental protection.

    Unfortunately, that has not been North Carolina's energy policy. In 2002, the General Assembly passed the Clean Smokestacks Act, which jacked up the cost of electric power based on spurious predictions of significant environmental benefits. In 2007, the General Assembly mandated that electric utilities, primarily Duke Energy, purchase high-cost "renewable" energy even if it makes no economic sense to do so — even though the primary stated goal, combating global warming, is entirely unachievable by any action North Carolina could take. For years, the state also essentially prohibited exploration of potential on-shore and off-shore reserves of oil and natural gas, although North Carolina is now preparing to allowing such exploration.

    There has always been an economic rationale for pursuing lower prices. Electricity and fuel oil are significant inputs for many industrial and commercial enterprises. Economies with affordable energy tend to be economies with higher rates of growth. Studies published in The Cato Journal, Public Finance Review, Growth and Change, Annals of Regional Science, and other scholarly journals show a statistically significant and negative relationship between a state's average energy prices and economic measures such as employment, business starts, or income growth.

    Recent international developments also underline why North Carolina should avoid if at all possible policies that push up energy prices. European countries, and Germany in particular, are in the midst of rethinking renewable-energy mandates and other policies that weaken their economic competitiveness. Martin Wansleben, president of the German Chamber of Commerce, told National Review that the United States "has become much more attractive to companies than Europe" because of "lower energy costs." The crisis in Ukraine also demonstrates that failing to allow markets for energy to function without political interference can perversely strengthen the hand of autocratic governments. As Ed Carson writes in Investor's Business Daily, "The West's best Russia policy is a bold energy policy" that includes greater freedom to produce and export fuel.

    Here at home, the recent coal-ash spill on the Dan River and the resulting debate about how the state should require Duke Energy to redress the real or potential environmental damage illustrate that any meaningful definition of "low-cost energy" must include the costs of safe waste disposal and compliance with air and water standards. Contrary to caricatures concocted by the Left, free-marketeers do not oppose government regulation, either through agency rulemaking or court adjudication. The right to own and use private property includes the right to have that property — and any water and air in the "commons" — protected against harm by other parties.

    The real dispute is about how to identify what harms are significant enough to merit regulatory response. If the compliance and economic costs of a regulation greatly exceed the health and safety benefits of mitigating a tiny harm, such a regulation is not in the public interest. That's why cost-benefit analysis, sunset requirements, and legislative involvement are critical to successful regulation.

    Greater innovation, competition, and consumer choice in the markets for electricity and fuel would benefit most North Carolinians. That would be an energy policy worth the name.