What's wrong with the energy bill.

ITEM: After the energy bill passed Congress, the Atlanta Journal-Constitution for August 1 commented: "Any way you look at it--economically, militarily, environmentally, geo-strategically--the energy bill agreed to by Congress represents' an abdication of national responsibility."

After listing some perceived problems, the paper asked rhetorically: "What new national policies are we adopting to prepare us for a coming world of scarce and expensive oil? As embodied in the energy bill, our strategy is to pump and burn the world's remaining oil faster and faster. If somebody's gonna burn that last barrel of oil, Congress wants that somebody to be an American.

"And unfortunately, that's pretty much it. Conservation gets short shrift: The bill does not, for example, require our automobiles to become more fuel-efficient, even though efficiency standards haven't changed in roughly two decades. To the extent that global warming is recognized, it is only as an excuse to justify the expansion of nuclear power, a goal that energy companies had long sought anyway.... Overall, when we need vision from our leaders, they give us greed instead."

ITEM: The San Jose Mercury News for August 1 complained that the passed bill did not properly set a national "energy policy." The U.S., said the paper, "needs a policy that focuses on reducing the environmental damage from energy use, especially smog and global warming."

CORRECTION: There is much to criticize in the energy bill, but most of the mass media gripes demanded even more regulations, which would have made the legislation worse.

A free country should not have a national energy "plan." There are many energy resources available to consumers and producers, who utilize substitutions and economic trade-offs when deciding on their actions; in a free market, incentives are provided by prices. Some consumers may decide to use a smaller car because of better gas mileage; others may opt for a larger one for safety reasons.

A national requirement, on the other hand, reduces choices. If producers think it would be worth their while, for example, to go into the solar-energy business, that should be their decision, without a tax subsidy; consumers will provide the demand, or lack thereof, with their purchases. "A price-coordinated economy facilitates incremental substitution, but political decision-making tends toward categorical priorities," explained Dr. Thomas Sowell in his Basic Economics: A Citizen's Guide to the Economy (2000)--"that is, declaring one thing absolutely more important than another and creating laws and policies accordingly."

Consider the crackdown sought over global warming (which is based on dubious assumptions and premises). Activists would have politicians decide what should be produced, and how, as well as trust them to set the very thermostat on the Earth itself. Alarmists who would impose the Kyoto Treaty care not a whit that, if all treaty signatories actually met its goals, the result would likely be only a 0.02 degree C reduction in the globe's temperature by 2050, at the cost of a 2-3 point reduction of the GDP in the United States, or the equivalent of a recession each year.

Most of the left-wing criticism directed against this energy bill came from those who don't believe in free markets, but apparently do believe in playing pork-barrel favorites.

Spiking gasoline prices notwithstanding, there are $2.6 billion in outright subsidies in the bill for oil and gas companies. Japanese producers will no doubt be delighted to benefit from subsidized hybrid cars. Energy research and development is underwritten, so taxpayers will essentially pay for their energy twice.

The bill was a grab bag of giveaways. To be sure, some bad features were eliminated at the end of the legislative process, including some solar and wind power requirements. "The good news is that the Soviet-style quota known as the Renewable Portfolio Standard is out," said Marlo Lewis of the Competitive Enterprise Institute. "The bad news is that the Soviet-style quota known as the ethanol mandate is in."

Ethanol is becoming the new favorite for government underwriting, following in the footsteps of "synthetic oil" and other boondoggles that have enjoyed huge subsidies. Never mind that research from Cornell University's David Pementel, a professor of agricultural sciences, shows that ethanol is less fuel-efficient than gasoline, and that it uses 30 percent more energy to produce than it generates.

Used as an additive to gasoline, ethanol is already reaping tax benefits worth more than 50 cents per gallon. Its producers, pointed out Ben Lieberman of the Heritage Foundation, "including agri-business giant Archer Daniels Midland, have convinced their friends in Congress to require that 7.5 billion gallons of it be added to the nation's fuel supply." An Energy Department study reveals that the latest ethanol mandate could cost automobile users more than 3 cents per gallon.

Years after Congress mandated the use of the additive MTBE (methyl tertiary butyl ether), lawmakers have now given it the boot. As MTBE gets phased out (in time for next spring's traditional gasoline price increases), other additives, including ethanol, will have to be used.

Fuel supplies will likely be driven down and costs driven up. "A provision in the massive energy bill that cleared Congress ... is likely to shrink the nation's gasoline supplies next spring," reported the Wall Street Journal on August 2, "and could boost prices eight cents a gallon or more." Larry Goldstein, president of the Petroleum Industry Research Foundation, told the Journal that MTBE has been the cheapest and most popular additive in part, "because it has a high octane rating and allows refiners to use lower-octane gasoline components for blending. 'Now we're going to have to shop the world for higher quality stocks, which will end up costing more money,' he says. 'Everything [Congress] did was to raise the cost to consumers.'"