Tradeoffs and priorities are stubborn things
Making tradeoffs and setting priorities isn’t easy in politics, but it has to be done. I will get to the latter soon, but two recent events in New York crystallize the problem of being unwilling to do the former. This week, the state legislature passed a budget that includes a provision outlawing gas stoves in virtually all new buildings. To proponents, it’s a huge milestone in the energy transition. To opponents, it’s a violation of freedom of choice and another case of government micromanaging things. In reality, both are wrong because the ban is a joke.
What happened earlier this year in the state legislature tells the story. There was an ambitious housing proposal pushed for by the governor and some in the legislature that would have made it much easier to build badly needed housing. New York, especially New York City, has a major housing shortage that has been a problem for years. If there was ever a time to address that, this legislative session was it.
That is not what happened. The proposed legislation was watered down substantially before being killed altogether by NIMBY legislators. Building housing in New York is extremely difficult. For that matter, building any type of structure is extremely difficult. That will continue to be true going forward. New York has, with one hand, banned gas stoves in almost all new buildings and, with the other hand, kept in place barriers preventing new buildings from being built. What could have been a major, substantive step towards addressing carbon emissions and housing affordability will now amount to nothing.[i]
I’m not passionate either way about the stove controversy, but I don’t have any objection to banning gas stoves. What I do have many objections to, as I write about regularly, is banning housing. If legislators in New York want to see fewer gas stoves used, they should allow more housing to be built. If more housing is built then more people will move to New York and use electric stoves rather than gas stoves. That will mean a decrease in carbon emissions and people burdened by high housing costs.
The problem is allowing more housing to be built would upset NIMBYs who want to keep everything as it is and avoid any inconveniences to their lives. That is the tradeoff. Either carbon emissions can be reduced and housing can be affordable or everything can be kept exactly as it is. The legislature opted to pass a ban on gas stoves while refusing to get rid of the barriers standing in its way. The result will be a ban that is purely symbolic, housing costs remaining high and New York continuing to lose people.
The problem of refusing to prioritize things and make tradeoffs is not unique to Democrats and the left, but because they are supposed to be serious about governing and policymaking, I have high expectations of them. That is in contrast to Republicans and the right who generally care more about entertainment and fighting for its own sake. Because most of them have no interest in governing or policymaking, I don’t expect much from them.
This post will be about Democrats and the left and their need to make tradeoffs and set priorities. Doing so will inevitably upset people, including some of their own supporters. But if they really want to accomplish the goals they like to talk about, that is going to have to happen. To be clear, when I say Democrats, I’m referring to both Democrats and the left.
The problem Democrats have had with making tradeoffs and prioritizing things is not new. I have written about it before. In the run up to passing what became the Inflation Reduction Act (IRA), there was a yearlong struggle to put anything passable together because Democrats in Congress and the Biden Administration were unwilling to tell some of their supporters that they weren’t going to get what they wanted. In the end, they belatedly did that and it was passed. The problem of tradeoffs and prioritization will have to be addressed again for it to be implemented successfully, which I will get to shortly.
Democrats have a very diverse coalition consisting of many different groups with different goals. There is nothing wrong with that, but some things will have to be prioritized over others. Refusal to do that can mean either nothing gets passed or if something does get passed its implementation will be needlessly difficult. The latter is a problem right now with the CHIPS Act.
The CHIPS Act was passed with the goal of boosting the domestic semiconductor industry. Construction and labor costs are much higher here than they are in Taiwan and other countries where semiconductor manufacturing is more prevalent. By providing subsidies, the CHIPS Act aims to reduce those costs so as to increase the number of semiconductor manufacturing facilities in the US.
That is a good and clear goal. The problem is that the Biden Administration has attached many conditions for businesses to be able to receive CHIPS Act funding that have nothing to do with semiconductors. Such requirements include provisions to help out veteran and minority owned businesses, provide child care to employees, have a plan for helping disadvantaged groups and for community investments in things like transit. None of those goals are bad. The problem is that they add on costs, which together can make taking CHIPS Act money not worthwhile. If that happens, it won’t matter how much money the government dedicates to boosting semiconductor manufacturing.
Ezra Klein has referred to the problem of trying to do everything all at once as “everything bagel liberalism.” Others have called it “kitchen sink liberalism,” which I think is better. Democrats in Congress and the Biden Administration wanted to enact much more legislation than they were able to pass. I wanted that, too. The solution to that is for Democrats to pass legislation dealing with things that didn’t get acted on last Congress. For example, promoting child care is great and the solution to it is to do something like an expanded child tax credit. The problem is that will have to wait until at least 2025 and groups who didn’t get what they wanted don’t want to wait.
What the Biden Administration is trying to do is accomplish goals it couldn’t get enacted legislatively by requiring them to be implemented on a smaller scale via the CHIPS Act. I would love for that to work, but tradeoffs exist and priorities have to be set. The goal of the CHIPS Act is to boost the domestic semiconductor industry. It has nothing to do with anything else.
In trying to promote all kinds of other goals, the Biden Administration runs the risk of achieving none of them. Businesses are not required to take CHIPS Act money. They will only do it if it works for their bottom line. Every additional expense imposed makes that less likely. The most likely alternative to boosting the semiconductor industry is not to do it and also achieve every Democratic wish list item. It is to accomplish very little or nothing at all.
There is no such thing as legislation that accomplishes every goal in one fell swoop. Legislation should focus on what it is designed to do. The CHIPS Act should focus on boosting the domestic semiconductor industry. If that means businesses receiving its funding don’t necessarily provide child care, use exclusively union labor or have a very diverse workforce, then so be it. I like those other goals and think they should be promoted, but the CHIPS Act is not the vehicle by which to do that.
Democrats are capable of learning
As frustrating as things can get, there has been plenty of progress made. That the IRA was passed is good evidence for that. After months of fighting, Democrats and the Biden Administration struck a deal and got it passed. Every single Democrat in Congress voted for it.
That is one of many major differences between Democrats and Republicans in Congress. For Democrats, when push comes to shove, they all would rather do something than nothing. The IRA is light years away from anything AOC and Bernie Sanders wanted, but they still voted for it. For the most hardline congressional Republicans, they would happily take nothing over something. For them, legislating doesn’t matter so it’s much easier to take extreme positions and get nothing for it.
For the longest time, the big concern among those who wanted action on climate change was that Congress would never act. That is no longer the case. The will to spend hundreds of billions of dollars addressing climate change is there. Passage of the IRA was great, but now comes the harder part of implementing it. This is where Democrats will have to decide what it is that they want.
The IRA is something businesses want to take advantage of. Its cost may wind up being many times higher than initially thought. That is a very good sign. It means it is being utilized much more than expected, making its impact on the energy transition much more significant. While there is high demand, the problem is that all the willingness in the world to take advantage of it won’t matter that much if red tape stands in the way. Although it is frustrating, there are signs that Democrats are recognizing that regulatory barriers will have to be addressed for the IRA to reach its potential.
The New York Times editorial page is a small bubble and not at all representative of any large voting constituency. What it can be good for is signaling where educated, elite left-wing opinion is or is going. This editorial from yesterday discusses the need for permitting reform so the IRA can be maximally effective. It recognizes that for clean energy to thrive, many more transmission lines will need to be built. Time is of the essence and red tape is standing in the way on the federal, state and local levels.
What is very encouraging is that the editorial mentions the need to reform the National Environmental Policy Act (NEPA). That is something I have written about before. The goal of protecting existing habitats is good, but it has to be weighed against the need to expand clean energy. As things stand now, NEPA is 100% weighted towards keeping things as they are. The length of environmental review periods is too long and needs to be reduced. At the same time, as the editorial notes, agencies can be given the funding they need to conduct reviews under a more limited time.
When it comes to permitting reform, there is a recognition among most Democrats in Congress that it will be necessary to speed up the energy transition. The Biden Administration seems to recognize that, too. The furthest left part of the Democratic Party remains opposed, which is bad, but not surprising. Permitting reform is something that can be done with bipartisan support. It failed last Congress, but it can be acted on in this Congress.
Even environmental groups are starting to recognize the need to fix permitting laws. This piece is from a long-time environmental activist advocating for environmentalists to embrace the building boom that will be necessary for clean energy to thrive. I am not a fan of his because he has a tendency to combine climate doomerism with opposition to actually doing anything substantive. To see him acknowledging the need for things to change is great. Even those who are hardline and rigid are capable of learning and changing.
Like everything else, permitting reform involves tradeoffs and priorities. The reason many environmental groups oppose it is because they think making building things easier would mean allowing fossil fuel projects to go forward. That is almost certainly true. The problem for environmentalists is that stopping permitting reform doesn’t stop fossil fuel projects from going forward.
Fossil fuels already have in place the infrastructure needed to drill for, mine, transport and burn them. Fossil fuels in fact are sometimes subject to fewer regulations than other types of energy production are. For example, oil and gas drilling projects are exempt from NEPA while geothermal energy drilling projects are not. In the case of building pipelines, the federal government has the authority to override state and local governments, but that doesn’t apply to transmission lines.
The amount of renewable energy that is being held back by laws like NEPA is massive. Offshore wind capacity alone could be expanded by nearly 20 times from where it is now. While permitting laws can hold up fossil fuel projects, they are currently holding up far more clean energy projects.
That is the tradeoff those opposed to permitting reform will have to make. By making it easier for clean energy to expand, fossil fuel projects could also be easier to carry out. The question is whether that is worth doing.
For Democrats opposed to reining in NEPA and other permitting laws, they will need to ask themselves whether it is more important to stop fossil fuel projects than it is to advance clean energy projects. I think the right priority is beyond obvious. Red tape is holding back some fossil fuel projects, but there are already plenty of them going on and that will continue to be the case with or without permitting reform.
Unlike fossil fuels, renewables, geothermal and nuclear are much newer industries that lack the infrastructure and capacity to expand on a large scale. That can only change if permitting reforms are enacted. In the case of renewables, transmission lines will have to be built quickly to maximize their reach. For geothermal, drilling for it needs to be made exempt from NEPA just like oil and gas drilling is. Transmission lines will also be important for it and nuclear.
To further advance renewables, geothermal and nuclear, the federal government will need to override any state and local permitting rules that stand in the way. The Times editorial mentions the case of a transmission line to carry wind power from Wyoming to Arizona that was just approved this year. It was first proposed in 2005. That kind of delay is not going to work. Transmission lines are going to be the single most important thing for advancing clean energy. The federal government should have, as the editorial suggests, one agency overseeing all of it to minimize the amount of bureaucracy.
In the case of nuclear, traditional reactors are unlikely to be built. What is likely to be built are smaller modular reactors, several of which are being worked on now. The problem is the Nuclear Regulatory Commission. Despite a mandate from Congress in 2019 to approve newer reactors, the career staff there have dragged their feet on it. They seem to have no understanding of the differences between traditional reactors and smaller modular ones. Since they can’t or won’t wrap their heads around that, they will have to be overruled by the political appointees in charge and maybe go looking for new jobs.
The good news with nuclear is that Democrats are finally getting over their ridiculous opposition to it. The IRA gives money to boost it and the infrastructure bill gives money to keep open existing plants. Jennifer Granholm, the energy secretary, is a vocal supporter of nuclear and has emphasized the important role it will play in reducing carbon emissions. Even AOC may be coming around to supporting it.
[i] This isn’t the first time New York has failed miserably on climate change. Two years ago, the Indian Point nuclear plant was shut down and replaced by gas generation. One year ago, a hydroelectric transmission line was approved to bring clean electricity from Quebec only after overcoming opposition from many “environmental” groups. Even though it will help reduce reliance on fossil fuels, it will only bring New York roughly back to where it was before Indian Point was shut down.