Obama, McCain and Coal

So, on Sunday night, it came to light that the San Francisco Chronicle had tapes of a January interview with Senator Barack Obama in which Obama basically said that electricity coming from coal was going to be a heck of a lot more expensive under his proposed cap-and-trade regulatory scheme meant to reduce CO2 emissions.

There is an interesting piece on the topic by Max Schulz at National Review Online titled “Coal in Your Stocking.” Schulz spells out the costs, and speculates about what might have happened in the presidential campaign if Obama’s statements had been released earlier.

Schulz noted:

In the January editorial-board meeting, Obama made two stunning comments about the costs of his cap-and-trade proposal to curb greenhouse gas emissions. First, he said, “If somebody wants to build a coal plant, they can — it’s just that it will bankrupt them, because they are going to be charged a huge sum for all that greenhouse gas that’s being emitted.” He mentioned that existing coal plants will have to retrofit their operations. “That will cost money,” Obama said. “They will pass that money on to consumers.” He followed that up with an even more damning pronouncement: “Under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket.”

And later, he wrote:

The reality is a lot closer to what Obama revealed in San Francisco. Costs for consumers will skyrocket. Coal is one of the cheapest sources of baseload power, cheaper than renewable technologies like wind and solar by orders of magnitude. Plus, it can provide reliable supplies, while power from windmills and solar panels is intermittent. Obama promises that his cap-and-trade plan would shut down the industry that provides half the nation’s electricity.

Shulz concluded:

The revelation of those comments Sunday night has given John McCain and Sarah Palin a small window of time to capitalize. They are trying these last two days to impress on voters that an Obama-Biden victory would mean bad news for coal-producing states like Ohio, Pennsylvania, and Virginia. More than that, however, an Obama win would be bad news for coal-consuming states, i.e., those that get a huge share of their electricity from coal or that house energy-intensive industries. And that’s most of the country. Skyrocketing energy costs won’t just hurt coal miners. They’ll hurt everybody.

Schulz gets the policy and cost analysis exactly right. The problem with his assessment of McCain’s response to this is that McCain has been leading the charge for these same exact policies. There is no difference between Obama and McCain on the issue. Both favor a cap-and-trade regulatory system that will drive electricity costs higher. Obama, amazingly, acknowledged the terrible costs cap-and-trade regulation will impose. McCain has long pushed the same agenda; he just doesn’t acknowledge the costs.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council