Climate & Energy Cutbacks Pose Costly Impacts

It’s instructive to look at the funding levels recently proposed by the House leadership for the remainder of this fiscal year in light of the eight hour hearing on climate change held last week before the House Energy and Power subcommittee. 

At the risk of oversimplification, the key messages from the Members who organized the hearing were that the science behind and risks associated with climate change are uncertain, EPA regulations will impose substantial costs and result in job losses, and U.S. industry needs regulatory certainty in order to invest in new facilities here in the United States.

How does the House leadership funding proposal (their proposed Continuing Resolution to fund the remainder of the fiscal year) address these issues?

Deep and substantial cuts are proposed in climate-related science programs at DOE, EPA, NASA, USGS, and NOAA. For example, a small group of lawmakers wrote last week that studying climate change falls outside of NASA’s primary mission and should be stricken from its budget. Improving our understanding of the potential magnitude and timing of climate change impacts is critical to making better informed policy decisions. Substantially reducing our ability to produce such information seems like a potentially expensive way to save money.

Another thread running through the hearings relates to the high costs of reducing greenhouse gas emissions and transitioning to cleaner forms of energy. The absence of economically viable technologies to meet future EPA regulations was often stated as a reason why such regulations would adversely impact our economy. Yet, here too, we find widespread and deep budget cuts in programs that are aimed at spurring the types of private sector innovation required to bring down the costs of the next generation of clean energy technologies.   

The Advanced Research Projects Agency-Energy (ARPA-E) was created expressly for funding high-risk, high-return innovative energy technologies. In FY2011 the White House requested $300 million for this program, which the House budget proposal would cut by $250 million. The proposed budget cuts would also slash support for EPA’s voluntary Energy Star labeling program, reduce funds for carbon capture and storage, and cut $900 million from DOE’s energy efficiency and renewable energy program currently funded at $2.3 billion.

Finally, representatives from numerous industries at the House hearing voiced concerns that regulatory uncertainty prevented them from making substantial investments in new facilities in the United States. Yet a provision in the House leadership proposal would put any EPA regulatory requirements on hold until the end of the fiscal year. The stated goal is to allow Congress more time to develop and pass specific legislation aimed at taking away EPA’s authority. However, this approach would create even greater uncertainty for industry: Will legislation cutting off EPA’s regulatory authority pass this year and be signed into law? How long, if at all, will it take Congress to address climate change with new legislation? What role will states and the courts play? Given the modest regulations (focusing on enhanced energy efficiency) that EPA has put in place to date, it seems clear that the path proposed in the House budget will provide less, rather than more, regulatory certainty for industry and will likely further delay investments in new facilities in this country.

Considering the overarching need to limit federal spending, future budgets will inevitably require cuts in a wide range of important federal programs. While climate programs should not be exempt from scrutiny, the proposed cuts and restrictions in the Continuing Resolution appear to only make it more difficult to achieve a smooth and timely transition to a robust clean energy economy.   

Steve Seidel is Vice President for Policy Analysis