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How Maryland disguises corporate welfare as environmentalism

Originally published in the Herald-Mail

Economic & Fiscal Policy, Environment, Taxes

by Thomas A. Firey

OP-EDS

FEBRUARY 15, 2017 Bookmark and Share

In early February, while people’s attention was on the stream of controversies involving the new Trump administration, Maryland lawmakers passed a clever piece of corporate welfare disguised as environmental protection. Their maneuver will force state residents to hand over tens of millions of dollars a year to energy companies and their Wall Street backers for years and years to come.

The legislation—technically an override of a veto by Gov. Larry Hogan, who tried to stop the shenanigans—is a “renewable energy portfolio” standard. It requires that 25 percent of Maryland’s electricity be generated by so-called “renewable” sources beginning in 2020, up from a previous requirement that 20 percent be generated by renewables by 2022.

That may sound like a good thing; after all, who could oppose “environmentally friendly” renewables? State lawmakers who supported the measure also claimed it would foster “green” jobs and improve human health.[1] Problem is, renewable energy standards don’t do much—if anything—to improve the environment or human health, and create precious few permanent jobs. They do, however, raise household electricity bills $1 to $3 dollars a month.[2] That may not sound like much, but it sums to between $49 million and $196 million (depending on assumptions) being transferred from Marylanders to energy companies and Wall Street in 2020 alone.

 “Renewable” under the law simply means the energy is generated from fuel that typically is either cheap or free. This includes wind, sunlight, and flowing water, which are free (though the equipment and other capital used to harness them are costly and often have environmental downsides). But “renewable” also includes energy produced by burning plant matter, animal manure, methane and trash[3]—which is not particularly environmentally clean or healthful.[4]

The requirement’s supporters admit that “renewables” may not be perfect, but they are cleaner than how electricity is generated now. They envision power companies closing their dirty coal-fired plants and replacing them with windmills and solar panels. But wind and solar hardly ever replace coal plants. Wind and solar are sporadic sources whose power often declines on especially hot or cold days when electricity demand is high. Coal-fired supply, on the other hand, is consistent and cannot be quickly throttled back or ramped up. For that reason, coal is used to supply “baseline” power, satisfying steady demand that is always present.

Other generation sources cover surges in demand, and solar and wind can be used to supplement that when they are available. But conventional “peaking” sources—typically highly efficient, low-emission natural gas plants—usually have low impact on the environment. If the requirement means that wind and solar replace some natural gas production, then there will be only modest environmental gains in exchange for the higher utility rates. And if the requirement means natural gas (or nuclear) generators are replaced by the burning of trash, biomass, methane and manure, that will be worse for the environment and human health. There are much more effective—and cheaper—ways to reduce pollution and combat climate change.

So why are Maryland lawmakers pushing the renewables requirement? The answer involves a common dynamic in politics: the “bootleggers and Baptists coalition.” Just like in Southern counties where the prohibition of alcohol is favored by both Baptists and bootleggers (for very different reasons), renewable energy requirements are favored by both high-minded (but sometimes naïve) environmentalists and not-so-high-minded but very shrewd energy companies and their Wall Street backers. The portfolio standard ensures those companies and financiers will have a market for their expensive electricity.

Political schemes that use regulation to deliver corporate profits are common in state capitals and Washington, D.C. But Annapolis may be the worst practitioner of these schemes in the nation. So it was no surprise to see Maryland Senate President Thomas “Mike” Miller Jr.—a maestro at creating politically derived profits and manipulating bootleggers and Baptists coalitions—helping to orchestrate the veto override.

If Maryland lawmakers really were serious about combating climate change and reducing pollution, they would simply tax the emission of greenhouse gases and other pollutants, which would encourage lower emissions and greater efficiency. No one likes a new tax, but it is a much cheaper and more effective way to reduce pollution and fight climate change than a byzantine policy like the renewables standard. Problem is, though a carbon tax would be good for the environment and human health, it wouldn’t funnel money to the politicians’ friends in the energy company boardrooms and on Wall Street.

Maryland’s renewables standard isn’t about the environment and human health; it’s about money. So in a sense the requirement is “green”—just not in the sense of cleaner air and a cooler planet.

Thomas A. Firey is a senior fellow with the Maryland Public Policy Institute and a Washington County native.



[1] Pamela Wood. “After Veto Override, Renewable Energy Sourcing in Maryland Accelerates.Baltimore Sun, Feb. 2, 2017.

[2] Department of Legislative Services, “Fiscal Policy Note, HB 1106,” Maryland General Assembly, 2016 Session.

[3]Maryland Renewable Energy Portfolio Standard Program—Frequently Asked Questions.” Maryland Public Service Commission. Accessed Feb. 7, 2017.

[4] See, e.g., Julia Pyper, “Does Burning Garbage to Produce Electricity Make Sense?” E&E News ClimateWire, Aug. 26, 2011.