It’s important to preface my remarks by saying that I don’t question the existence of climate change and that humans are a major (but not the sole) contributor. This is what science is telling us. As I argue below, I do object to energy policies that derive from a political or quasi-religious agenda, misinformation and ignorance of economic principles. Such policies are inescapably destined to jeopardize the public good for the sake of benefitting special interests.
Three truths should drive energy policy in New Mexico. The first is that whatever action New Mexico takes to reduce greenhouse gas (GHG) emissions has a negligible effect on climate change. Even what California does has no measurable effect. This is what the science says, verified by complex climate models.
The second truth is that New Mexico’s clean energy policies like the Energy Transition Act (ETA) and the electric vehicle (EV) mandates, as well as other state and local actions to shrink GHG emissions inevitably drive up the price of energy to New Mexicans. Consequently, economic growth in the state diminishes, in addition to imposing an disparate burden on low-income households and, obviously, hurting energy consumers in general.
The third truth derives from the first two: clean energy policies miserably fail a cost-benefit test for New Mexico, especially when subsidies like tax credits for EVs and mandates favoring renewable energy and specific technologies are major features.
One must then ask why is New Mexico so committed to promoting clean energy. These policies descend from the quasi-religious conviction that society needs to drastically reduce GHG emissions or else it will inescapably face future catastrophes (a “chicken little” mentality if you will). While the science says this scenario could happen, it has a much lower probability than conveyed in the mainstream press.
One glaring observation stands out: much of the active climate policies comes from what economists called rent-seeking, indicating that special interest groups are the true catalysts of these policies. Their inherent interest encompasses only themselves − not the broader public interest. Their vision of the future entails filling up their pockets or satisfying their followed doctrine − for example, no cost is too high to combat climate change. This seems especially true in New Mexico. Yet (in case anyone has forgotten) the job of policymakers is to balance the different interests (including energy consumers) to best serve the public good. What an antiquated idea!
Before adopting an energy policy, as an exercise in democracy the state should entertain the idea of polling its citizen to know how much they would be willing to pay to have clean energy. I would bet that it is far less than what the clean energy policies will compel them to pay.
After all, behind clean energy policies is the belief that consumers can’t be trusted to behave rationally or in a socially desirable way. The EV mandate, for example, forces consumers to do something that they otherwise would not do. By reducing options for vehicle owners, driving will become more expensive in New Mexico. Besides, subsidizing EVs will unevenly benefit middle- and upper-income households over low-income households. Subsidies for energy efficiency, funded in the state by both utility customers and taxpayers, presume that energy consumers are irrational and uninformed of the benefits from EE. It is probably more accurate to say that these consumers just find better alternatives to invest their limited monies.
New Mexico is a poor state with the highest poverty rate in the country. The states with the most active climate policies generally are much wealthier. They can better afford to have their citizens pay higher energy prices and endure lower economic growth than a state like New Mexico.
We are already seeing the effect of clean energy mandates in PNM’s rate filings that call for increasing electricity rates partly to comply with the ETA mandates (“the chickens are coming home to roost”). Studies have shown that states with the highest increases in electricity rates in recent years have the most active climate policies. Although New Mexico’s electricity rates are below the national average, it will be no surprise if they soar above the national average in the near future.
Good energy policy recognizes that a clean-energy world is no free lunch (look no further than the misadventures in California and Germany), trade-offs are inevitable (renewable energy versus reliable and low-price electricity service), and the benefits must exceed the costs. One doesn’t have to dig too deeply to see that an aggressive climate policy like here in New Mexico, which some politicians and others want to fast-track even more, falls short in meeting these criteria.
From my experience working on energy policy since the 1970s, I have observed that advocates of a particular energy policy typically overstate the benefits and understate the costs. These policies tend to place more faith in the implausible benevolence and infallibility of government intervention than in the choices made by consumers and other participants in the marketplace. New Mexico’s clean energy policy regretfully mimics this creed.
Kenneth W. Costello is a regulatory economist and independent consultant. He resides in Santa Fe.
