The Energy Bill is Back, With Bootleggers and Baptists Onboard

When last we saw the Murkowski-Manchin energy bill, it was March and the bill was stymied by arguments over amendments.  At the time we dubbed the bill the American Energy Bureaucracy Act, and that description is still apt.  We questioned, and still question, the need for the raft of new programs the bill is pushing.  Indeed, given that the economy is still recovering from the coronavirus shock, new layers of energy bureaucracy are the last thing needed right now.  Talk is now in the air of bringing the bill back to the Senate floor thanks to an agreement on one of the amendments at issue earlier in the year having to do with regulating hydrofluorocarbons (HFCs), a class of refrigerant.  This deal turns the relatively benign original bill into affirmatively harmful legislation that should be opposed.

HFCs are common industrial chemicals used worldwide for refrigeration and cooling.  They are also now believed to contribute to global warming as greenhouse gases.  There is an international treaty to phase out HFCs called the Kigali Amendment, which amends an earlier treaty known as the Montreal Protocol.  The United States has not ratified the Kigali Amendment, but has ratified the Montreal Protocol.  And what is the Montreal Protocol?  It was an dtreaty to phase out another class of refrigerants called chlorofluorocarbons (CFCs), which were believed to be harming the ozone layer.  When CFCs were phased out, the replacement was HFCs.  So the “problem” that the Kigali Amendment seeks to solve was actually created by the very treaty it is amending.  Over the last couple decades the world spent untold billions converting old CFC refrigeration and cooling to the bureaucratically approved HFCs.  Now, the UN has decided that the exercise must be done again, with small businesses like restaurants and convenience stores once again stuck with the bill.  The UN treaty-making bureaucracy is impervious to the cruel irony.

Corporate Bootleggers and Green Baptists

The Trump administration has not submitted the Kigali Amendment to the Senate for ratification, citing the vast compliance costs, so a bootleggers and Baptists coalition has come together to try to pass legislation phasing out HFCs instead.  Recall that “bootleggers and Baptists” describes the teaming up of mafia alcohol smugglers with religious temperance zealots to push for Prohibition.  The mafia made money because legal competitors were outlawed; the temperance leagues got their purification of society.  

In the HFCs debate the bootleggers are big corporations like Honeywell and Chemours, who make the expensive replacement chemicals for HFCs, and the Air-conditioning Heating and Refrigeration Institute (AHRI), which represents the HVAC companies that stand to make a killing by replacing all the systems that businesses just installed to comply with the Montreal Protocol.  The Baptists, as usual when it comes to environmental policy, are the green left, for whom Americans’ comfortable standard of living is a continuing affront.

Sen. Kennedy (R-LA), who has been leading the push for HFCs legislation, portrays this bootleggers and Baptists coalition as a virtue: Big Business is on board, environmentalists are on board, what more could you want?  Left out there, though, is the average customer, like a restaurant that just recently spent a huge amount to replace their cooling and refrigeration to comply with the Montreal Protocol, who now will have to find the cash to replace it again.  There are millions of air conditioning and cooling systems that will have to be upgraded or replaced, all at owners’ expense.  These costs are enormous.  And the profits that Honeywell, Chemours and AHRI members stand to reap are similarly hefty.  Yes, big business is happy for the government to ban competing chemicals.  Yes, HVAC installers are excited about the government mandating demand for their services.  But someone has to pay for all this rent-seeking.

The other problems still remain

Beyond the HFCs amendment, our underlying concerns about the Senate energy bill remain.  Whatever the Senate passes is not what will ultimately be sent to the President.  This week the House is rushing through its own energy bill packed full of subsidies and handouts.  Passing the Senate bill will provide a vehicle for a House-Senate compromise bill that will be determined behind closed doors.  This conference committee process provides the opportunity for every subsidy and mandate under the sun to hitch a ride on the legislation.

In the end, the verdict from March still applies today.  There is nothing urgent in this legislation.  Indeed, it is not clear why energy legislation is needed at all given low energy prices, rising energy exports, and accelerating private sector innovation everywhere from natural gas to renewables. Many of the parts of this bill that are truly noncontroversial and consensus policy could and should be passed individually.  The Senate would be better off simply pulling the plug on this “low-energy” energy bill. The United States has enough bureaucracy in our energy sector as it is.