Energy Policy:

Fmr. Rep. Inglis says subsidy phaseout, carbon tax the future of conservative energy narrative

How can conservatives shape the dialogue on energy and climate to reinvigorate the policy debate in Washington? During today's OnPoint, former Rep. Bob Inglis (R-S.C.) explains why he believes a carbon tax and the gradual phaseout of energy subsidies should play key roles in the discussion. Inglis, now the executive director of the Energy and Enterprise Initiative at George Mason University, also weighs in on U.S. EPA's decision last week to reconsider the impact of its new mercury rule on future power plants.

Transcript

Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Bob Inglis, former Republican congressman from South Carolina's 4th District and now the executive director of the Energy and Enterprise Initiative at George Mason University. Congressman, thanks for coming on the show.

Bob Inglis: Good to be with you, Monica. Thank you.

Monica Trauzzi: Congressman, when you consider the current state of play, the low approval ratings, the lack of action on energy in Congress, how do you believe a group like this one, the one you just created with George Mason University, will have a significant impact on the policy discussion? Are you going to be able to break through that wall?

Bob Inglis: Well, what we've got to do is, the Energy and Enterprise Initiative, go out into the country and try to build support so that officeholders can feel comfortable leading in this area. The problem right now is they don't really feel comfortable leading because there doesn't seem to be support out there in the districts and in the states. So what our job is, is to go build that support so that they can feel more comfortable stepping out into this arena.

Monica Trauzzi: As the former ranking member of the Subcommittee on Energy and Environment and now having sort of taken a step back from Congress for a year, what do you think conservatives are doing wrong on energy?

Bob Inglis: Well, I think mostly it's just not believing our message enough. I mean I think that if we, what we need is the confidence to know that conservatives have the answer for energy and climate, it's called accountability and free enterprise and making the free enterprise system work. And so what we really need is a dose of real confidence to go out there and say we can engage on this issue. This is not about the big government mandate approach. This is not about fickle tax incentives and those sorts of things. This is about just setting the economics right and that's our strong suit. So we just need to realize that and go engage.

Monica Trauzzi: So, what's been the cause of conservatives sort of stepping away from the historical messaging on energy? Has it been the influence of things like the tea party?

Bob Inglis: Well, I think it's been the Great Recession, you know, the immediate pain of the Great Recession. If I'm worried about this month's paycheck and this month's mortgage, I'm not really focused on the future of energy supply. But if the pain of the Great Recession will let up a little bit, maybe we can go back to focusing a little bit longer term and realize that really this is a danger. Our energy situation is a danger, but it's also an incredible opportunity to make a lot of money for the United States and for entrepreneurs to sell these products around the world. All it takes is just a way of setting the economics right so the challenger fuels can take on the incumbent fossil fuels.

Monica Trauzzi: There's so much disagreement on how this administration has approached energy and environment regulations. And just last week EPA announced that it would reconsider how its new mercury rule would affect the future power plants. Do you think this decision came as a result of pressure from the industry and if not the regulation, then how do we get industry to sort of shift gears when we look at the future of our energy structure?

Bob Inglis: Really, I think the best way to do this is through legislation rather than through regulation. And that's where conservatives are right to be concerned about bureaucracy that sets rules rather than having the Congress and the elected representatives make decisions. But I also understand the frustration of those who would say, well, how do you get the Congress to act? Well, the way you get the Congress to act is just to build support for this proposition, that we can face these big decisions and we can send an elegant price signal. That's the most efficient way to handle the problem, rather than through government mandates or incentives is just to send a price signal. Attach all the costs to all the fuels, eliminate all subsidies for all the fuels and watch the free enterprise system fix it.

Monica Trauzzi: Does the renewable energy industry need a production tax extension?

Bob Inglis: Well, I'd prefer not. I'd prefer there be no subsidies. Eliminate all subsidies for all fuels. That includes the fossil fuels, of course. Now, of course, when you say that, wind and solar start gasping for air. But hold on for the second part, which is and let's attach all costs to all fuels. So let's make coal, for example, fully accountable for all of its health costs. If you do that, it really changes the economics of what wind and solar look like and what nuclear looks like. But, as it is, we've got this frustration of a market distortion that keeps us from this free enterprise solution.

Monica Trauzzi: But can newer technologies without subsidies compete against older technologies that have been subsidized for decades?

Bob Inglis: They can if you, particularly in the case of those fossil fuels that really has some negative externalities. If you attach those, then when you see the true cost of them, well, then yeah, wind and solar may just win out in some places. Not everywhere, it depends on the circumstances. But the beauty of that is then free enterprise is making that decision based on those local circumstances, rather than through some sort of clumsy system where the government tries to mandate it. But yeah, attach all those costs to those incumbent fossil fuels and then watch the market respond.

Monica Trauzzi: We've been dancing around this a bit. You're a fan of a carbon tax.

Bob Inglis: Yeah.

Monica Trauzzi: On the last go around, cap and trade was the mechanism of choice for the debate.

Bob Inglis: Yeah.

Monica Trauzzi: Any strong indicators that a carbon tax might actually have support once the elections are over?

Bob Inglis: Well, I think it's too early to tell that. We've got to build support for it, so I'm not here to tell you that we've got it all in the bag. No, we've got a long way to go to convince folks that really there is a free enterprise solution here and it is this elegant price signal. I voted against cap and trade. I thought it was hopelessly complicated, embarrassing in the free allocations, decimated American manufacturing, huge growth of government. For all those reasons, I voted against it. But I proposed an alternative, which was a revenue neutral tax swap, where we would reduce taxes on payroll, shift the tax on the carbon dioxide. At the Energy and Enterprise Initiative we won't be selling that particular piece of legislation. We're open to other approaches as well that do the same thing. But basically, stop taxing something that you want more of which is income, labor, industry, and start taxing something you want less of, which is pollution. Just change what you tax. And even the folks that disagree with us about climate change could agree that, gee, that would fix the economics. And then you'd get this revolution in energy of real innovation. Rather than government forced innovation, it would be driven by the market, which is much more powerful.

Monica Trauzzi: But politically, how do you ever sell something with the word tax associated with it?

Bob Inglis: That's the problem. Here's the key message that we've got to get to -- especially to conservatives so that they can embrace our answer, our conservative answer, which is free enterprise, is do you believe there's such a thing as a free lunch? Do you believe it's possible that we are somehow hiding these costs and they never come back to bite us? The answer is, no. Unless you're some kind of hopeless liberal maybe that believes that there's such a thing as a free lunch, you understand that, no, there's no such thing as a free lunch. We're paying all the costs of coal-fired electricity right now in our insurance premiums and through health care, Medicare, Medicaid, through cost shift at the hospital. We're paying all right, just not at the meter. If we paid at the meter, I'd know my need and I'd be dialing up a solar hot water heater installer right now to get a solar hot water heater on my house in South Carolina. But because I don't know my need, I don't make that call. So the cost is hidden from me. Attach it to my meter and then I'll see it. But what we've got to get through is this message that unless you believe in the tooth fairy, you probably don't believe there's such a thing as a free lunch and you probably want to see the whole cost and be honest about it.

Monica Trauzzi: Beyond rhetoric on things like Solyndra, how do you anticipate energy issues will play into the upcoming presidential election?

Bob Inglis: Well, I think there will be a lot of discussion of course about natural gas, because it's really becoming a great replacement of course for coal-fired electricity. That's very exciting for a lot of reasons, the innovation I'm talking about, but also the climactic, reduction of the climactic cost. So I think there will be a lot of conversation about that and some conversation about how we're going to somehow perhaps drill our way to petroleum independence. But I think that we, that's where we need to make sure everybody understands that we're competing with a cartel. That even if we discover great amounts of petroleum, there will still be a cartel and they'll still be running the oil price. So, hopefully, we'll get to this discussion about how you harness the power of free enterprise, how you unleash this incredible economic engine that's available to us. Because I really believe that this is one way to get the kind of growth that helped us to balance the budget in the late 90s through the Internet and the PC, the growth of those new instruments. That with energy we might approximate something like that.

Monica Trauzzi: And which candidate has stronger footing on energy?

Bob Inglis: I think that Mitt Romney is the guy that, you know, will be able to perhaps have that Nixon-goes-to-China moment once he gets elected, to be able to say, you know, I understand about free enterprise. I understand how it works. I understand that sustainability means making a profit. It's a great definition I heard from an entrepreneur in Spartanburg, South Carolina. Sustainability means making a profit he told me. If you can make a profit, it's sustainable. If you can't, it's not. And I think Mitt Romney has a great opportunity to explain that to the American people and to do for energy a real transformation that could, as I say, harness the power of free enterprise to deliver real solutions.

Monica Trauzzi: All right, a lot left to debate. We'll end it there on that note. Thank you for coming on the show.

Bob Inglis: Good to be with you.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

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