Acton Commentary

'New Source' Sanity


Recently, high-ranking federal regulators have informally recommended that the White House relax some of the most controversial provisions of federal air pollution regulations. Known colloquially as the “new source review” provisions, the rules require the nation's power plants to upgrade equipment dealing with pollution control when plants upgrade their operations. This provision has long been a source of conflict between the energy industry and federal regulators. However informal this new recommendation is, this move seems to inject a bit of sanity into the ongoing national debate between national energy demand and environmental protection.

The air pollution regulations at issue are known as the so-called “new source review” provisions of the Clean Air Act. These provisions, which tie power plant improvements to air pollution controls, have created billions of dollars in increased costs for utilities and hinder their ability to modernize plants in order to make them more energy efficient. In effect, these ill-founded regulations have created perverse disincentives within the utility industry and have had an effect opposite their intended purpose. As a result, our nation suffers from a diminished utility infrastructure, as the costs for upgrading and enlarging operations are, in effect, hit with a large financial penalty for making improvements designed to meet the needs of rising electric power demand.

Furthermore, these repressive environmental regulations have failed to engage the creativity and ingenuity of the energy industry. New technologies making power plants more energy efficient are costly to implement under a regulatory regime that penalizes ingenuity. All parties involved in this matter undoubtedly agree that increased energy efficiency is a desired goal. Increased efficiency lowers production costs, increases generating capacity, and is more environmentally beneficial. The difficulty is that the present regulations simply make these goals too costly to achieve. As a result, older, more inefficient plants remain in use. For those with strong convictions regarding environmental protection, it remains to be seen why they would continue to enforce and pursue a series of regulations that makes more efficient and environmentally sound technology cost prohibitive.

Despite the moral rhetoric of the environmental lobby concerning environmental protection and corporate environmental exploitation, the target of such “green regulations” is not environmental protection at all. Rather, the real target is the energy industry and its perceived pervasive influence. New York's Attorney General Elliot Spitzer, in offering his remarks on the proposed relaxation of the “new source review” provisions, provides a small glimpse into the larger campaign against the energy industry. In an official statement, Mr. Spitzer comments:

“This is a cave to the oil and gas industry, and the effect will be a disaster for the environment, and the health of those who live in the Northeast, and it will be a boon to only the very narrow interests of the energy industry.”

It is not clear to me how reducing the penalty for installing more energy efficient and environmentally sound equipment will somehow “be a boon to only the very narrow interests of the energy industry.” The reality of what the energy industry provides for consumers is far from narrow. Lights, heat, and electric power are not luxuries that most people in the United States can do without. Rather, the services provided by the energy industry in this country have been the literal fuel that has allowed the United States to achieve its status as a prosperous and leading world power.

The recommendation to relax the penalty placed on utilities when they upgrade is a common-sense solution to a very simple problem. Utilities need to upgrade to make power plants more energy efficient and to provide for increased energy demand. The government regulations currently in place make such improvements costly–leaving in place older, less efficient, and less environmentally friendly plants. By relaxing the regulation, utilities will be able to project with more certainty the costs associated with plant upgrades. It is these necessary upgrades that will accomplish the alleged desired effect of the “new source review” provisions–energy efficiency and reduced air pollution.

The “narrow interests of the energy industry” derided by Mr. Spitzer and other environmental groups are not really narrow at all. He and other environmental zealots have revealed their own narrow interests–destroying what they see as an all-powerful energy industry. If it were, in fact, environmental protection that served as the foundational concern, he and others like him should happily agree with the recommendation to relax the costly and unnecessary “new source review” provisions. In reality, the only narrow interests represented in this present discussion are the interests of the radical environmental lobby.