Presidential Candidates Can Ride on Energy 'Wedges'

Presidential Candidates Can Ride on Energy 'Wedges'

As momentum builds towards the 2016 Presidential election, energy policy will probably find its way into stump speeches. In 2008, the year nominal crude oil prices peaked, Republicans exhorted voters to let companies “drill, baby, drill!” In the 2012 race, after the companies had drilled and, more importantly, fracked U.S. oil production back into an uptrend, President Obama expressed newfound resource ecumenicalism with support for “all of the above.”

What will we hear this year? Some slogans seem more likely than others, and the reason probably has more to do with political science than geology or economics. Campaign managers tend to look for “wedge” issues candidates can use to differentiate their positions from their competitors. If most credible contenders for the Oval Office believe “safe and responsible” shale gas production offers a job-creating bridge to a low-carbon economy – and, by all appearances, they do – there isn’t much to argue about. For elections, that’s a bad thing.

How did energy policy get “wedgy” enough for campaign slogans, anyway? The nation’s resource diversity may be a factor, but it doesn’t seem like a very good explanation. Most Americans want clean air and cheap fuel, and disparate regional resource endowments offer different ways to obtain them. Even so, nature has a way of crossing party lines. Texas Republicans might plump for petroleum, but the Iowa GOP is so corn crazy that many hardened conservatives water down their anti-ethanol screeds when passing through Ames or Des Moines.

In Congress, elected officials usually vote in favor of whatever they have in the ground back home. My team at ClearView Energy Partners, LLC examined several decades of Congressional energy policy votes. We found that lawmakers backed their home-state resource bases roughly 70% of the time, and the relationship was as strong for green energy as it was for fossil fuels. Partisanship can give way to pragmatism on big issues, especially when the resource in question plays a big role in home-state economies. For example, Senators Lisa Murkowski (R-AK) and Heidi Heitkamp (D-ND) found common cause on crude oil exports.

Demand may offer a better explanation for the political wedginess of energy policy than supply. Republican voters spend more of their disposable personal income than Democrats do on electricity, gasoline and home heating. According to our CY2014 estimates, voters in the states Mitt Romney won in 2012 spent 22% more on energy than voters in the states that President Obama won (7% of per capita DPI in the red states vs. 5.7% in the blue ones). Non-trivial disparities in incomes, driving distances and temperature extremes may make voters in spread out red states between the coasts more sensitive to policies that increase energy costs than in the densely packed (and higher paid) population centers of coastal, blue states.

Climate change in general – and President Obama’s Clean Power Plan (CPP) in particular – could prove to be the wedgiest energy issue of the 2016 Presidential race. When Republicans take the stage in Cleveland at their party’s first debate on August 6, a freshly released, final power plant rule from the Environmental Protection Agency could give them plenty of material. Candidates who deride the CPP as a symbol of government overreach may find that their criticisms have economic resonance with the GOP faithful. In 2014, the Romney states emitted 35% more greenhouse gases (GHG) than the Obama states (10.7 metric tons of CO2 equivalent per capita vs. 7.9). On average, the Romney states burned roughly twice as much coal for power as the Obama states (50% vs. 25%). Coal-fired power plant shutdowns will hit Republicans harder on the supply side, too: the Romney states mine roughly 80% of the nation’s coal.

Oil exports could also get wedgy. More than 80% of U.S. onshore oil production comes from the Romney states. As of July 24, Rep. Joe Barton (R-TX) had only 12 Democrats among 106 cosponsors on legislation that would end the crude oil export ban (H.R. 702) – and six of the 12 hail from oil-producing states. Of the 16 Senators who have put their names on oil export bills, only two are Democrats. That said, before oil exports can become a wedge issue, a Presidential candidate will need to explicitly support the end of the export ban. So far that hasn’t happened, probably because no candidate wants to risk blame for higher gasoline costs, never mind that ending the ban might reduce pump prices.

Some issues could become wedges for reasons that have little or nothing to do with fundamental economic impacts. For example, green power subsidies seem likely to function in Presidential debates as a proxy for government intervention. On the grid, however, partisan differences aren’t very stark at all. On average, the Romney states generated approximately as much of their power from wind energy last year as the Obama states, and solar energy remains a de minimis source of power generation in every state, notwithstanding the rapid growth of rooftop installations.

The campaigns ahead will probably address all these topics, and more. Energy policy may not be the stuff of election victories, but it sure gives politicians plenty of grist for debate. And, as far as elections go, that tends to be a good thing.

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