Energy Economics: Surplus Q&A’s 3.0


After the WMEAC Energy Forum on Wednesday, March 2nd, at Grand Rapids Community College, we found ourselves once more with an abundance of unanswered questions. These questions will be addressed here and in following posts, so look forward to a few more.

By WMEAC Policy Intern Chris Christou

Q: Do you see a regional scheme like RGGI being implemented in the Great Lakes or Midwest?

A: The Regional Greenhouse Gas Initiative (RGGI) is a coalition of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont that was created to cap, trade, and reduce greenhouse gasses produced in those states. This is a regional attempt utilize a cap and trade system for managing CO2 from coal burning electric power– not to be confused with the national legislation that passed the House of Representatives in 2009, but stalled in the Senate. The participating states are reporting success so far, with an overall increase in jobs and reduction in ratepayer charges associated with this initiative.

RGGI began as a dialogue between Northeastern and Mid-Atlantic state governors interested in stopping climate change. It was introduced and approved on a state level, with a few states like Massachusetts at first rejecting the bill – likely based on the views of the governor at the time (Mitt Romney-R).  With the election of Deval Patrick, Massachusetts jumped on board.

That said it is not likely Michigan will be adopting such a plan in the near future. With the State House, Senate, and Governor’s office firmly in control of a party uninterested in regulating carbon emissions.  However, it’s worth mentioning that Michigan currently has a renewable portfolio standard requiring the state to achieve 10% energy from renewable resources.

Q: Why do we always hear about the downside of higher energy prices but almost never the upside? (jobs)

A: A very similar question was addressed by WMEAC intern Kevin Soubly in the Q&A’s 2.0. So for a run down of the job-creation factor of renewable energy, please direct your attention there.

We constantly hear about high energy prices because consumers pay both directly and indirectly for energy.  It under-girds the entire economy!  The impact of high energy prices are especially prominent at the moment because of the recession the economy has been lumbering to leave behind.  Rising prices have a particularly strong impact on middle class and low-income budgets of which they consume a proportionally much larger chunk.

But it is also true that there are positive effects of higher fossil fuel prices, especially when they lead to a significant reduction in demand. The reader may recall 2008 when gasoline exceeded four dollars a gallon nationally.  Americans responded by driving less and consuming less.  With decreased consumption came decreased road congestion, decreased mining and refining activity, and a large decrease in the production and release of pollutants including Nox, Sox, Mercury, and Co2.

Likewise, higher fossil fuel prices give space for entrepreneurs to build innovate new products and green energy.  For example, high gas prices and government pressure convinced GM to get serious about more fuel efficient cars.  At least in part, the Chevy Volt could be considered a silver lining of $4.00 plus gasoline.   Chevy has hired new workers and increased hours to make the Volt.

So next time you see $4.50 gasoline remember:  your tank maybe half empty, but the glass is half full!

0 replies
  1. Alan Kitson
    Alan Kitson says:

    I understand what you are saying and to a certain extent I agree. However, I suspect that as pervasive as energy costs are in effecting the costs of almost everything in our economy, higher prices will have a deleterious effect on the overall economy. Where do we start and stop with this? Where is the right balance? Is there another way? I think if we hope for higher prices, we must resign ourselves to lowering our standard of living. I’m not sure I want to go there.

    Reply

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