“America must be running entirely on clean energy by mid-century” – 2016 Democratic Party platform

Delegates to the Democratic Party’s national convention released their new platform on July 21^st. Its energy policy spans several pages and ranks as the sixth most important issue for the party—ahead of education (7^th), health care (8^th), and national security (10^th). The central goal of the Democratic energy platform is to transition the nation entirely to renewable (non-carbon emitting) energy sources by ~2050.

The “Why” of the Democratic Party’s Energy Platform

Bjarne Tellmann (General Counsel of Pearson PLC) recently reminded me of Simon Sinek’s TED Talk (“Start with Why”), which argues that “people don’t buy what you do, they buy why you do it.” The Democrat’s energy platform opens with an emotional plea for why its energy policy is needed: “Cities from Miami to Baltimore are already threatened by rising seas. California and the West have suffered years of brutal drought. Alaska has been scorched by wildfire. New York has been battered by superstorms, and Texas swamped by flash floods. The best science tells us that without ambitious, immediate action across our economy to cut carbon pollution and other greenhouse gases, all of these impacts will be far worse in the future. We cannot leave our children a planet that has been profoundly damaged.”

To address climate change, the Democratic Party proposes two goals:

• “50 percent of our electricity from clean energy sources within a decade”
• “America must be running entirely on clean energy by mid-century”

The “How” of the Democratic Party’s Energy Platform

While zero fossil fuels in 34 years may sound unrealistic, the Democratic Party is proposing a suite of new policies that would move the nation decidedly in that direction. It’s akin to an ancient method of execution called lingchi — often translated as “death by a thousand cuts”— in which a “knife was used to methodically remove portions of the body over an extended period of time, eventually resulting in death” (Wikipedia). This is essentially what the Democratic Party proposes for the American petroleum industry.

(1) Carbon Taxation. “Democrats believe that carbon dioxide, methane, and other greenhouse gases should be priced to reflect their negative externalities, and to accelerate the transition to a clean energy economy and help meet our climate goals” (2016 Democratic Party platform). Practically speaking, what would a carbon tax look like? It would likely start low and then gradually increase over time. For example, British Columbia currently taxes carbon at a rate of $30 per ton, which translates into ~25 cents per gallon of gasoline. To achieve the reductions that Democrats seek, the carbon tax likely would need to escalate over time to $425 per ton (which equates to ~$3.75 per gallon at the gas pump).

(2) Clean Energy Subsidies. It’s not enough to just make petroleum more expensive to consume. In order for renewables to be competitive, they also must be subsidized. The 2016 platform provides: “Democrats believe the tax code must reflect our commitment to a clean energy future by eliminating special tax breaks and subsidies for fossil fuel companies as well as defending and extending tax incentives for energy efficiency and clean energy.” Such clean energy subsidies could be greatly expanded by using the proceeds from carbon taxes to “incentivize wind, solar, and other renewable energy over the development of new natural gas power plants” (2016 Democratic Party platform).

(3) Regulate Hydraulic Fracturing. In addition to manipulating prices through taxes and subsidies, the Democrats also propose to aggressively regulate the primary technology used to produce cheap natural gas: “Democrats are committed to closing the Halliburton loophole that stripped the Environmental Protection Agency (EPA) of its ability to regulate hydraulic fracturing, and ensuring tough safeguards are [put] in place.” Additional regulations will increase the cost of new wells and also extend the time it takes to obtain drilling permits. A typical mineral lease requires developers to establish commercial production within three years—or else, they forfeit the lease. Longer wait times for permits will increase the risk that leases will expire before they can be drilled.

(4) Community Bans. The Democratic Party platform provides: “We believe hydraulic fracturing should not take place where . . . local communities oppose it.” Currently, laws in Texas and elsewhere prohibit communities from implementing such bans. A federal statute that overturns the uniformity of statewide regulation would create a complex patchwork of “go” and “no go” counties/communities. This would make it harder for developers to lease the contiguous acreage required for shale projects.

(5) Restrict Drilling on Federal Lands/Waters. Considerable petroleum resources await development under federally-controlled lands and waters. The Democrats “will phase down extraction of fossil fuels from our public lands” and “oppose drilling in the Arctic and off the Atlantic coast” (2016 Democratic Party platform). Democrats hope that the combined effect of less hydraulic fracturing and a slowing of Gulf of Mexico drilling will decrease the supply of American natural gas—thereby making it a less attractive fuel for electricity generation.

(6) Fewer Pipeline Permits. The President of the United States wields considerable power over interstate and international pipelines and LNG projects. The Democratic platform reiterates its support for President Obama’s rejection of Keystone: “We support President Obama’s decision to reject the Keystone XL pipeline. As we continue working to reduce carbon dioxide, methane, and other greenhouse gas emissions, we must ensure federal actions do not ‘significantly exacerbate’ global warming.” Based on this reasoning, other new pipelines and LNG projects could be similarly vulnerable.

(7) Criminalize Dissent. “If people aren’t on board with the ‘why’, you can forget the ‘how’, because the change won’t happen” (Bjarne Tellmann). In order for the Democrats to enact their energy policies, they first have to persuade the American people. This brings us back to the “why”—namely the premise that fossil fuels are destroying our planet: “All corporations owe it to their shareholders to fully analyze and disclose the risks they face, including climate risk. Those who fail to do so should be held accountable. Democrats also respectfully request the Department of Justice to investigate allegations of corporate fraud on the part of fossil fuel companies accused of misleading shareholders and the public on the scientific reality of climate change.”

The Democrats’ 2016 platform defends the basis for why fossil fuels should be eliminated and then proposes to bring about its goals through a variety of taxes, subsidies, and regulations. Yet nowhere does the platform acknowledge its obvious weakness: bypass. Until renewable energy can beat fossil fuels on price—that is, a price unprotected by American taxes and subsidies—there will be a strong incentive for someone, somewhere to bypass the United States. Those nations who are willing to burn fossil fuels will have a competitive advantage due to their lower energy cost.

The only way for America to run “entirely on clean energy” and remain competitive in the global economy is to decrease the real price of renewable energy through technological advances. As Microsoft’s Bill Gates explained, “You need the innovation so that the cost of clean is lower than the coal based energy generation.” Mr. Gates, Alibaba’s Jack Ma, Facebook’s Mark Zuckerberg, and Virgin’s Richard Branson, among others, have founded the Breakthrough Energy Coalition to pursue just such improvements in renewable technology. Innovation also is being supported by those who buy stock or otherwise invest in renewable companies. The Democratic Party’s vision of zero fossil fuels may be realized by 2050, but it won’t be brought about by a thousand cuts of taxes, subsidies, and regulations.

About the Gaille Energy Blog. The Gaille Energy Blog discusses issues in the field of energy law, with weekly posts at http://www.gaillelaw.com. Scott Gaille is a Lecturer in Law at the University of Chicago Law School, an Adjunct Professor in Management at Rice University’s Graduate School of Business, and the author of two books on energy law (Shale Energy Development and International Energy Development).