Policy Director For Life Powered - Brent Bennet

Episode Transcript

Speaker 1 (00:01):
Welcome to the nationally syndicated Energy Mix Radio show produced
by the Energy Network Media Group. The Energy Mix Radio
Show will give you an inside look at the energy
industry and how it affects you by talking with industry leaders, experts,
and government officials on the Energy Mix Radio Show.

Speaker 2 (00:17):
Hi everyone, welcome to the Energy Mix Radio Show. I'm
your guest host today, Brent Bennett. I'm the policy director
for the Life Power Project at the Texta Public Policy Foundation,
and our mission, my initiative is to raise America's energy IQ.
You offered from me a couple times before, and we're
happy to be back again guest hosting. Hopefully we can

(00:37):
raise your energy IQ a little bit today, talking about
the Inflation Reduction Act, the possible repeal of it, and
everything that Congress is working on right now with regard
to the Reconciliation Bill and some very important discussions about
what's going to be repealed, what won't be, how we're
going to pay for the tax cuts that the administration

(01:01):
and Congress wants to get done right now. The Senate
just passed their blueprint last week, the House has one
as well, and now they have to go and do
the reconciliation process. So it's going to be really occupying
a lot of time in DC over the next couple
of months, and it's very important for those of us
in the energy world to understand what's going on because

(01:21):
there's a lot of money that's being thrown around. And
that's what we're going to discuss today with our guest,
Joshua Aloux. Josh is the Research is a researcher at
the Cato Institute. He specializes in analyzing economic and budgetary
effects of taxation, energy policy, and environmental regulation. He is
the author co author of a recent study that has

(01:44):
been cited in the Wall Street Journal and numerous other
places regarding the true cost of the Inflation Reduction Act,
not the budget score that it got of three hundred
seventy billion when it was passed, but the actual cost
both for the next ten years and going forward, and
some numbers that are really your mind, and also some
things that for Congress needs to be considering when they're

(02:05):
going through and you know, looking at, Okay, how do
we pay for the tax cuts? Ball we should get
rid of these energy substies. First of all. That should
be the first place that we go to before joining Cato.
Joshua was an m A Fellow at the Mercada Center
for George Mason University and he'll to be a political
science for Virginia Tech and an m A and Economics
from George Mason University. Joshua, welcome to the program. Thank

(02:26):
you for coming.

Speaker 3 (02:27):
Yeah, thank you so much for having me. I'm excited
to talk about one of the worst policies in recent memory.

Speaker 2 (02:32):
Yes, and the exciting part is that we have a
chance to correct some of it now. So let's get
into that a little bit. So you so you wrote
this paper with our friend Travis Fisher, who Travish is
now moving on to work in the Department of Energy
under Chris Wright. And so that's that's really exciting and

(02:52):
hopefully has a chance to influence some things there. But
really the the the action is going to be in
Congress over the next couple of months. They've got a
lot of decision to make about what to cut in
order to achieve the goal of the Reconciliation Package, which
is to extend the tax cuts that were instituted in
twenty seventeen. They're going to expire at the end of

(03:13):
this year. They're looking for at a minimum one point
five trillion dollars in cuts spending cuts, And from what
your report tells me is that a lot of that
can come from cutting back a lot of the provisions
in the Inflation Reduction Act, which, by the way, every
Republican in Congress voted against the Inflation Reduction Act. But

(03:35):
now we have some that are coming back and saying, well,
we don't really want to get rid of everything. We
like some of these things because it's putting money into
our district, and YadA YadA. It's it's a lot of
typical Washington kind of backsliding when it comes to cutting spending,
which is the reason that we're you know, thirty something
trillion dollars in debt. So give me some flavors to

(03:58):
you know what, how did they come up with the
kind of original estimate cost estimates for the Inflation Reduction Act,
which was about three hundred and seventy billion, And how
is it then now you're saying in your report that
the real cost of it's going to be north of
a trillion dollars over the next ten years. And again
that you know, trillion dollars could take a lot big
chunk out of that one point five trillion that they
need to cut and they're so they're wrangling their hands

(04:20):
about all of this when they've got a huge pot
of money that they could really dig into that would
you were down to incredible benefits for the industry if
we got rid of these subsidies. So kind of described
to me how that you know the scoring process and
then how you came up with some of your estimates.

Speaker 3 (04:37):
Yeah. Absolutely, so to the average year who's not aware
of the Joint Committee on Taxations policy, every major piece
of legislation that has a significant budgetary cost will get
a basis basic score from the committee on how much
it's going to cost over the next ten years. This
is everything from the Trump tax cuts in twenty seventeen

(04:57):
to bills like the Inflation Reduction Act so CBO and
JCT in Congressional Budget Office and Joint Committee on Taxation,
they work together to score what this impact fiscal impact
is going to have on taxpayers and on the federal budget.
And they originally estimated the three hundred and seventy billion
dollar number that you've heard many times that you heard
Democrats to out when they were rooting on the bill.

(05:19):
But this number just kind of spiraled out of control.
And the main reason is because the subsidies and all
the provisions within it, primarily the tax credits that are
on the energy and environmental side, which is our focus,
are totally unlimited. There's no caps, there's no limits on
the number of people can apply for these and the
amount that you can take over the ten year. So

(05:41):
this has caused many people to review it far before
we did. Goldman, Sachs, pen More in School and Brookings
in several other groups have all taken a look at
this and estimated it to cost much much more than
CBO did. So we took a deeper look as made
it that it could cost anywhere between nine hundred and

(06:03):
thirty six billion and one point nine to seven trillion
over the next ten years, and more importantly upwards of
two trillion and maybe even touching the five trillion number
by twenty fifty due to the uncapped nature of these.
So we've seen this grow so much, and like you said,
with Republicans looking to cut significant amounts of money, at

(06:24):
least especially on the house side, being a little bit
more aggressive on that cutting, there's a lot of money
here in something that every single Republican House and Senate
voted against. This is something that Vice President Harris at
the time had to step in and issue a tying
vote to get it through the Senate. This is not
popular policy, this is not good policy, and most importantly,

(06:48):
it's expensive policy. And that's something that, especially if we're
trying to put money back in the pockets of Americans,
is something that we cannot afford as taxpayers to shell
out one to two trillion to special interest screws groups,
solar companies, offshore win companies, and so many others when
this should be staying with businesses and hardworking Americans.

Speaker 2 (07:10):
Yeah, it's really about, as we say, the foundation a lot.
It's it's you want to have a broad tax over,
a broad tax base and low tax rates and things
like this. The reason this makes it hard to do
the tax cuts because the tax cuts are trying to
cut taxes for everyone. But when you're giving out so
much money to certain groups, that makes it really hard

(07:31):
to cut taxes for everybody else. Now, what would be
what are the kind of largest sources of cost or
what are the largest tax credits that are involved in
the Inflation Reduction Act. Can you just kind of go
through the top two or three and describe what they
why they're so expensive.

Speaker 3 (07:50):
Yeah, so there's a couple of major players. One of
the ones that the towered most is the production tax credit,
and then it's companion partner, the investment credit. These two
provisions are likely to be the bulk of the not
only tenure cost, but the vast, vast majority of the
cost over the next twenty five plus years. These two

(08:12):
are things that directly subsidize growth, production and investment in electricity,
grid and other forms of power, including things like nuclear, wind, solar,
The whole lot of anything that does not cause a
noticeable amount of emissions into the environment is something that

(08:32):
is eligible. Either you can either choose the production tax credit,
where you get paid upon the production of energy, or
the investment tax credit, which is an upfront investment by
the government into your turbine or your center. So those
are the two biggest ones that we are most focused
on because they have such an exponential growth over the

(08:55):
next ten years and more importantly in that years. But
that's not it importantly that should be the lowest hanging
fruit of all this is the clean vehicles credits. These
are primarily designed for electric vehicles that currently can get
up to seven five hundred dollars per vehicle upon purchase.
And the average electric electric vehicle buyer is not your

(09:17):
average joe. These are people who make a lot of money.
These people can afford a fifty sixty thousand dollars car already,
and this is just a tax credit that goes primarily
to those electric car producers, but also to the upper
income earners who are purchasing electric cars. And then, lastly,
I'd be remiss not to mention the advanced Manufacturing credits

(09:37):
that are going to so many different projects across this country.
And really what Republicans seem to now be unwilling to
realize the great travesty that these are because this money
just directly going to companies. And why that might sound
good on the surface, rerouting taxpayer dollars to companies is
something that has been tried for decades, including the New Deal,

(10:00):
and we've seen over eighty years of bad experience with
redistributing money to companies through government intervention. So those are
just a couple of them. I'm leaving off programs that
are worth one hundred two hundred billion dollars over the
next ten years. This is a massive cost and I
just can't can't begin to explain how many credits are

(10:22):
literally hundreds of billions of dollars.

Speaker 2 (10:24):
Yeah, yeah, the battery credits in particular, I notice can
be worth up to a billion dollars a year for
things like the Tesla Gaia factory. Like the production tax credit,
it's an enormous number. The tax credits for hydrogen production
are just absolutely out of this world. When you do
it on a per unit of energy basis, it's even

(10:45):
worse than the production tax credit. The production tax credit itself,
it gives about twenty over twenty dollars per make a
lot hour those to those resources. That's more than what
a lot of those resources going to earn and revenue
from selling electricity. So we're talking about giving them more
money and subsidies and what they're actually making from selling electricity,

(11:07):
which is which is absolutely wild. There's no way that
gas power plants can compete in that environment unless they
too are being subsidized, which is what we're having to
do in Texas is basically, you know, finding the legislatures
finding ways to subsidize gas power plants. And we've got
to fix this problem because it's just becoming it's going
to be out of control. And fortunately, you know, Congress

(11:30):
has the opportunity now to scale it back and has
really the perfect opportunity to do this. So we'll go
to our We'll go to our break right now, and
then when we come back, we'll discuss what Congress is
going through right now. What are some of the things
that they can that they can take a look at,
you know, over the next couple of months to start
fixing this problem. Does the Energy Mix radio show and

(11:50):
I'm your host Bred Bennett will be back in a
few minutes.

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Welcome back to the Energy Mix radio show. I'm your
host Brent Bennett with our guest Joshua Aloux of the
Cato Institute. Joshua just wrote a paper. CO wrote a
paper about just how expensive the energy subsides are in

(13:16):
Inflation Reduction Act, and how critical it is that Congress
use this period over the next six months where they're
trying to find spending cuts to balance the tax cuts
that they want to pass. How critical it is that
they take advantage of this opportunity now to fix this problem.
So with that, Joshua, let's kind of give us some
detail about how the reconciliation process works, and then what

(13:41):
the timelines are over the next few months and what
we might expect to see coming out of that. So,
of course, you know, the House and the Senate both
have blueprints now for what they want to do, but
now they have to go through the process of reconciling
those you know, the different the different pieces and getting
to a final bill that they can then the big
beautiful bill that Trump wants to pass. So kind of

(14:04):
give us a flavor of kind of the timelines and
some of the steps that need to be taken, and
then what are some of the particular items that you
think could be scaled back or repealed as part of
this process.

Speaker 3 (14:17):
Yeah, So, as I'm sure a lot of people have
heard in the media, Trump is in the Republicans are
trying to pass this big beautiful bill to not only
extend the Tax Cuts and Jobs Act that he passed
in his first administration, but peel back, hopefully some of
the errors that the last administration implemented. And so that's
going to look different depending on what version of the

(14:39):
bill we ultimately get. From my perspective, the House did
a much better job at being fiscally responsible and understanding
that this is a massive fiscal cost extending the Tax
Cuts and Jobs Act, which is going to be anywhere
between four and five trillion dollars to extend over the
next ten years, So we need to offset some of
that signific with cuts. Some of these cuts are going

(15:02):
to come from programs like Medicare, Medicaid and other things
that Republicans are, you know, the things that Doge talks
about and you hear in the news more generally. But
that's not really enough to pay for all these tax cuts.
And what's the best way to cut taxes is by
broadening the base and lowering the rates. And one way

(15:23):
we can broaden the base is not give exclusions to
companies for things like producing energy, clean energy, producing electric vehicles.
So there's a bunch of programs within the IRA which
are all tax credits, which ultimately just look like subsidies
due to direct pay and other filing reasons. But these
are things that can cost anywhere, as we've said, from

(15:44):
one to two trillions. So the production tax credit and
investment tax credit. Repealing both of those will get you
anywhere from our estimates between three hundred billion to nearly
a trillion dollars worth of offsets for tax cuts, and
then if you look at other things that should be
even easier for problems agree upon, like not subsidizing electric

(16:06):
vehicle purchases, that's going to be up to two hundred billion.
Places like Goldman, Sachs and pen Morton have the estimate
up to four hundred billion. So this is a massive
chunk of cash that can help offset it. Touching other
things like advanced manufacturing and energy efficiency and residential tax credits.
This is another two hundred three hundred billion dollars appealing

(16:29):
an entire array, which is what we recommend me in
my car All Thurdy, Travis Fisher. We think it's the
only way forward that is upwards of a trillion dollars
and could really make a massive dent in making a
fiscally responsible future.

Speaker 2 (16:46):
Yeah, and just the numbers are just mind blowing. You
just kind of throw all these, you know, hundreds of
billions out there and it just kind of washes over
your head. Just for context, I'm working in the Texas
legislature a lot right now. We're right in the middle
of our session. We're actually going to have our budget
being debated this week, and the buy annual bi annual
two year budget for the state of Texas is on
the order of three hundred billion dollars. So we have,

(17:09):
you know, the second largest state in the country. Uh,
And I mean every like every one of these tax
credits is almost as large as our entire two year budget.
And a lot of this money is flowing into into
Texas and destroying our energy market because it's making unreliable
energy a lot a lot cheaper and then have forcing

(17:30):
us to subsidize reliability as a result, And it's not
actually lowering our our electricity bills at all. Our our
electricity We've we've taken in more production investment tax credit
money Texas has than any other state in the country
by far, and yet our electricity bills, our residential bills
are higher than every other state around us. So all
this money that we've taken in should lower our electricity rates,

(17:53):
and it's not. It's actually causing them to go up
a little bit. And the the disaster that we had
four years ago would have been a lot better if
we just invested a quarter of the money that we
put into wind and solar into reliability. The disaster that
we had in Texas four years ago would not have happened,
and now we're looking at, you know, having this happen

(18:17):
in more and more places around the country that have
even less, that have even less wind and solar resource
because the subsieds are going to force utilities to you know,
use wind and solar wherever they can, even in the
northeast where you don't have much winter sun at all.
So it's it's just really, it's really crazy what's going on.

(18:37):
So give me a sense real quick of the timelines
that we have about a minute and a half here
of the kind of the timelines that they have to
meet in order to get this h this big, beautiful built.

Speaker 3 (18:47):
On Well, the most important trigger that will happen at
the time, probably sometimes the summer is the debt ceiling.
So Republicans a couple of weeks ago past and extension
for the debt sea and that piece is what needs
to That's what causes the government to not be able
to continue to move forward and why we have government

(19:08):
shutdowns in recent years, and the threat of that is
something certainly Republicans want to avoid. So getting this bill
done and creating a new budget that is paid for
is the best way to do that. This is going
to depend This timeline depends upon IRS revenue returns. If
revenue is slightly low, we could hit this as early
as i've heard May, but if we get a more

(19:30):
standard what the IRS assumes we're going to get for revenue,
it will likely be a little later into the summer.
But regardless, this is something that is going to probably
happen over the next couple months. If Republicans are responsible,
they will get it done well before this limit. So
we don't have to have a shutdown, we don't have
to have crazy throw markets into distortions, and whether the

(19:51):
government's going to get funded, what the debt ceiling is
going to look like. So if they can get out
ahead of this this summer before we hit that debt ceiling,
that's the best way to do that. And really the
only way to do that is by pay for the
tax cuts, and the best way to pay for the
tax cuts is repealing something that you clearly explained is
actually hurting energy market, it's not helping it.

Speaker 2 (20:12):
Yeah, we'll go into a little bit more that in
our next segment. It's time to go to a break.
This is the Energy Mixed Radio Show.

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All right, welcome back to the Energy Mix radio show.
We've got Joshua A. Looux here from the Cato Institute
talking about the inflation Reduction Act and why we need
to repeal it, And the biggest reason why we need

(21:34):
to repeal it, other than the fact that it costs
a lot of money and can be used to and
the benefit of lowering tax rates for everyone instead of
giving handouts to special interests, is the harm that the
subsidies are doing to our electric grits, basically subsidizing unreliable
energy and forcing us to subsidize reliability. So kind of

(21:58):
go into josh A v Hands some of the distortions
that are happening. And I could talk all day about
this too. I've written papers about this, but I kind
of want to hear from from your perspective on a
national scale.

Speaker 2 (22:09):
You know what is what is really the damage that's
being wrought by pouring so much money into wind and solar.

Speaker 3 (22:18):
Yeah, we're doing arguably irreversible, decades long damage to both
the safety and national security of Americans by undermining electricity
and grid as a whole. This grid is something that
has been aging for a long time, and due to
load growth primarily driven by AI data centers and increase

(22:40):
Internet related programming, we have seen that there is a
great need for more electricity and this need has not
is very easily could be met by the free market
using more gas and using more of the sources that
we are used, and we are used some when we
are used some solar. It was already an energy mix.
But what the IRA did was funnel money into these

(23:04):
decarbonization sources that were pan picked by the administration not
for the reason of their cost effectiveness or their efficiency,
but because they were low carbon emitting. So rather than
doing something that was fiscally responsible, they did something that
is ultimately for the climate, which we all want to
protect the climate, but this might not be the best

(23:25):
way to do that, especially when you have programs like
offshore wind, which states like New Jersey are trying to
do gigawatts worth, and these are just not cost effective.
There's a reason there wasn't a lot of this prior
to programs like this, and it's because they're very expensive
relative to things like gas.

Speaker 2 (23:43):
Yeah, and the problem was during the last administration is
that we had, on the one hand, they were throwing
subsidies into wind and solar, and on the other hand,
we're trying to regulate gas and coal out of existence
with the Carbon Rule, and so companies like ge and
others that make gas turbines. We're looking at the looking

(24:04):
at this like we're not going to have a market
after twenty thirty. We're there's we're not going to be
able to sell our products, and so they haven't ramped
up their production to match what's needed for now everybody's
everyone is scrambling to get gas turbines. I've heard that
GE has a ten to one backlog of gas turbines

(24:24):
because now everyone wants one, but for for four plus years,
and even going back before that, you look in the
Obama era, you know, we're being told to basically, you know,
these companies are being told to produce fewer turbans. But
the fact is is that even if you have wind
and solar, you still need stuff to back it up.
You know, you need either energy storage or gas, uh

(24:45):
and so it doesn't bid pouring money into these resources
doesn't obviate the need for reliability. So that's that's really
the the challenge that we face here is ramping those
you know, now we have because of these market distortions,
we're now caught in the situation where we can't meet
the demand. And just really quick kind of explain if

(25:06):
you can what the impact is of you know, having
so much money. It just kind of give us a
sense of the beginning. You know, hundreds of billions of dollars.
How much is this compared to what's been done in
the past, and how much it's going to impact the markets.

Speaker 3 (25:21):
Yeah, the short of it is that it is the
largest sum of money ever sent by the government to
private companies for the electricity grid and for energy development.
This is hundreds of billions of dollars. This is an
industry that is entirely propped up in ways by these subsidies.
Things like wind and sol or many of these companies

(25:43):
only exist because of that, because of these subsidies. And
the problem now you've created that energy grids are going
to run on stuff that is just paid for by
taxpayers and then also paid for by taxpayers again when
they buy this electricity. So you've propped up this entire
thing on these wooden legs that are funded by us,
and now you need to actually replace that with a

(26:05):
reliable thing like gas, but also take away the subsidies
to make sure that it's a level playing field.

Speaker 5 (26:11):
Yeah.

Speaker 2 (26:11):
And the sooner we do it, the less damage we cause,
and the substats now are going to be to ten
times larger in volume than what they were prior to
the Inflation Reduction Act. And so that's if you think
the problem is already bad, we haven't even gotten really
to the start of seeing the impact of the substation
from the Place Reduction Act. So the need to act

(26:32):
now is really critical. So we'll talk a little bit
about that and some other topics on our next segment.
This is the Energy Mixed Radio Show.

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Speaker 2 (27:22):
Hi, welcome back to the Energy Mixed Radio Show. Still
talking about this the amazing cost of the Inflation Reduction
Act and what can be done to repeal some of
this and why it should be repealed. You know, the
other thing that was talked about a lot, and the
proponents of the Inflather Reduction Act talked about a lot,
were the emissions benefits. Right, This is you know say,

(27:44):
is basically the biggest bill on climate action ever passed
in the United States, which is true if you look
at it from a monetary standpoint, It's the most money
we've ever thrown at basically anything low carbon. I mean,
you go through the whole everything in the bill that's
being subsidized as being subsidized primarily to reduce emissions. And again,

(28:06):
as I said in the last at the end of
the last segment, the the the dollar amounts that we're
talking about here are five to ten x. The Production
Investment Task credits are going to be five to ten
x larger under the Inflational Reduction Act than they were
previously because of the expanded eligibility, because there's now more
projects that are in the queue to take advantage of them.

(28:26):
The actual tax credit, there's there's adders to it that
make it larger than what it was before and also
which we'll talk a little bit more about in the
next segment. Uh, there's no there's no sunset date effectively,
and and that's and that's going to be a huge
problem too, Uh that we're if we don't get rid
of it now, then then there's a possibility that it

(28:49):
could that the credits will never end. But the other
thing I want to talk about was kind of what's
the ostensible benefit here? Uh, you know, we're talking about
throwing a trillion dollars in the next ten years to
basically the effect of it. At best, we're not going
At best, we're going to keep electricity prices some of

(29:10):
where they are, which is kind of what's happened in
Texas at works. We're going to raise electricity prices by
subsidizing unreliable energy. But the you know, what's the ostensible
benefit here in terms of climate? Are we really going
to reduce emissions that much through this bill? And if so,
what's what's kind of the cost per ton of what

(29:31):
we're of what we're actually reducing. Can you just can
you go into that a little bit, Joshua and and
just describe how how much money we're throwing at at
doing this. Yeah, like you said, Bayan himself said it
was the biggest, largest, most expensive investment to reduce carbon
emissions in American history and arguably from our estimate's world history.

(29:55):
And that needs to come with massive benefits, especially when
you take an account all the problems that's going to
cause with the grid and reliability and for consumers who
face varying climates like those in New England or even
those in Texas. So we need massive offsets emissions wise
to even make this reasonable. But that's not what we're seeing.

Speaker 3 (30:17):
We're seeing a piece of legislation that does little to
nothing to change the wide world that of CO two
that we live in. As you know, the US is
just one of the many polluters in this world, and
we are a small chunk of that. But according to
EIA Estimates, which is a government organization, they assume that

(30:41):
we will decrease CO two missions by zero zero point
seven percent through twenty fifty with the IRA. This is
compared to where if we didn't have the IRA, we
would reduce emissions by zero point four percent annually. This
is a point percentage difference to super small amount. Why

(31:02):
people on the left and from the bidminstration will throw
out the line, that's nine billion metric tons that is
being reduced when you're polluting hundreds of metric billion metric tons.
It doesn't stand in comparison. And people love to use
the social cost of carbon say that it has this
massive negative impact, which is highly debated and should be

(31:26):
a whole other podcast at this point. But more importantly,
the CO two abatement costs in the IRA is anywhere,
by our estimates, from two hundred and twenty four dollars
to five hundred and thirty five dollars per ton, which
is well above even what the most egregious social cost
of carbon estimates by them Biden administration put it at.

Speaker 2 (31:49):
Yeah, the Biden administration proposed social costs of carbon in
the fifty to sixty dollars range. They were trying to
bump up the estimate later, but yeah, it's even even
by that metric, we're we're not even we're not even abating.
We're paying a lot more to try and get rid

(32:10):
of these emissions than what we would be, you know,
gaining in terms of benefit. And that's using their own numbers,
which like you said, are highly highly disputable, and I
think to put some more contexts in those emissions reductions,
you're talking about a point four point seven percent of
global emissions, right, that's the that was the number, right, Yeah,

(32:32):
And so the US itself as about twelve percent of
global CO two emissions. Uh, and our power plants are
about a third of that, so about four percent. So
we're talking about reducing our power plant emissions by about
less than a quarter. Well, we'll go into why that's
important later, because there's triggers in the bill, in the

(32:54):
Inflation Reduction Act, to say we have to reduce emissions
by a certain amount before the substance go away. And
so it's it's it's just astounding that we would have
so much money being thrown out for basically a less
than one percent reduction total global emissions. And also, to
put that in some more context, the actual the actual

(33:18):
effect on CO two concentrations in the atmosphere, that's what
really matters when it comes to global warming is how
much CO two is in the atmosphere. Is the effect
of the entire US reducing emissions, reducing all of its
emissions over the next say twenty years or so, if

(33:39):
we go net zero, about twenty fifty is only a
couple percent. So yeah, we have twelve percent of global
emissions human emissions. But there's also the fact that we
have a lot of CO two in the atmosphere already
and that it will only change CO two concentrations by
less than a couple percent if we get rid of
all our missions. So we're talking about a barely measurable impact.

(34:02):
And then you go to the impact on temperature, and
it's less than it's less than a couple hundreds.

Speaker 3 (34:07):
Of a degree.

Speaker 2 (34:08):
We can't even we can barely even measure that much,
less try to impute a real benefit to it. So
the alchemy that goes into creating the the the idea
of a benefit here is just not it's not real.
And the last thing I'll say is that there's you know,
what this really shows is that the the the Act

(34:31):
was more about giving money to favorite industries. It was
about the climate. If they were serious about the climate,
then they would do things that actually reduced emissions by
a measurable amount. And instead it just seems to be well,
we're going to do something that looks like it's solving
the problem and that will benefit favored constituencies, which is
all the more reason why we should get rid of

(34:52):
of the subsidies because there's not really going to be
any benefit to them. So so thanks for that, Joshua,
and we'll go one more segment after this. This is the
Energy Mixed Radio Show.

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Speaker 5 (36:12):
HI.

Speaker 2 (36:12):
And welcome back to our final segment of this episode
the Energy Mix radio show. I'm your guest host Brent
Bennett with Joshua Aloux of the Cato Institute, and we
really want to look beyond now kind of the ten
year period which we talked about before, and look at
just how expensive the Inflation Reduction Act is going to
be going well into the future beyond that because what

(36:34):
unlike previous extensions of particularly the Production Investment Tax Credit,
there is no fixed sunset date now on those tax credits.
What happens is is they are they are they are
only set to sunset when the emissions the the CO
two emissions of the electricity sector fall below seventy fall
seventy five percent below where they were in twenty twenty two.

(36:58):
And so if you think about what we just said
last where the forecast from the Energy Information Administration, the
official source for the government, is that they're only going
to reduce the pro divisions are only going to reduce
emissions by twenty five percent roughly in the power sector.
If that then we're basically looking at extending these indefinitely.

(37:20):
And you know, I'll note too that most of the
we've seen emissions reductions in the electricity sector over the
last fifteen years primarily from their peak. We're roughly around
two thousand and five, so actually last twenty years, primarily
because of switching from coal to gas. So we've had
a lot of coal to gas switching. We're built a
lot more gas natural gas power plants in the last

(37:40):
twenty years and retired coal as a result. The effect
of wind and solar on that has been marginal, and
so we're trying to effectively achieve this stendy five percent
reduction primarily by subsizing wind and solars. So I kind
of just gave you all your talking points, Joshua, but
you know, explain a little more about Yeah, just how
do how have all these subseeeds have no sunset date?
You can talk about some of the other ones too,

(38:01):
not just the PTC and ITC, and then how that
becomes so expensive in the future.

Speaker 3 (38:08):
Yeah, So as you as you laid out our paper,
we demonstrate that under all almost all reference cases that
EIA produces, we will not reach that reduction by twenty
fifty in even many years beyond that. So due to
picking the twenty twenty two date instead of a more
general date or more importantly, how budgets and things should

(38:30):
be decided with actual end dates, actual dollar amounts, so
that American taxpayers aren't on the hook for an unlimited amount.
We need to see a massive, massive reduction even in
EIA's high uptake of the Inflation Reduction Act, we do
not trigger that phase down by twenty fifty. This will
result in billions, hundreds of billions of dollars over the

(38:50):
next twenty five years because of the PTC and ITC.
This is going to be over a trillion dollars in
the production tax credit, and we have on our high
end estimate up to two point four trillion dollars in
costs for the Production Tax Credit by twenty to fifty,
just because we're going to be continuing to add these

(39:11):
energy clean energy sources, because they're so massively subsidized, and
because American taxpayers are on hook for in some cases
with offshore wind, over half of the cost of production. Anyways,
this is just a snowball effect where businesses are able
to enter the field start a business, the government pays
for the vast majority of the actual costs. They sell
this to consumers at a higher cost because we are

(39:34):
eliminating things like gas, either indirectly because we are sourcing
subsidies to their competitors, or directly by heavily regulating them
as the EPA did under the Bider administration, to ultimately
end up in a world where we're having over three
trillion dollars potentially just from the PTC and ITC by
twenty fifty. And this was not something that individuals voted on.

(39:57):
They voted on in reconciliation bill for the next ten
year years, not for unlimited subsidies. And there's other subsidies
even worse that aren't even capped by a GG emission.
Critical minerals provisions within the forty five X Advanced Manufacturing
Credit do not face down. Ever, this is something that
should have violated the Bird rule, but somehow got past

(40:18):
the parliamentarian. But ultimately we're looking at stuff that will
continue to expand and why our estimate is so important
not only for the tenure, for the budget scoring conversation
we had earlier but more importantly, for the next twenty
five years, the next thirty years, this is a cost
that will continue to grow and will likely be two
plus trillion dollars, which is when you compare that to

(40:40):
other programs, it's making other programs look minuscule compared to
just how much money we're pouring into these uncapped subsidies.

Speaker 2 (40:48):
Yeah, it is. It is crazy. Like I said, this
is you know, this is a lot. This is more
money just for these individual programs than a lot of states,
even large states like Texas are going to be spending
for their entire budgets.

Speaker 5 (41:00):
This time.

Speaker 2 (41:00):
It's going to make these programs comparable in size to
some of the other like to our defense budget. Even
not quite, but you know, it's it's getting up there.
So it's it's really remarkable. And again we're not we're
not actually really expanding our energy production with this. We're
just replacing what a reliable system that we already have.

(41:21):
And that's and that's that's just absurd in my mind,
and that's why we wanted to kind of you know,
bring this out to this audience, just how absurd this
is and how important it is that Congress take care
of this now because it's it's it's going to start
getting baked in. I think one of the reasons to
your estimates so high is that you know, most of

(41:42):
most things that the production tax credit lasts ten years,
and you have the opportunity at the end of ten
years to repower your system to get to extend the
tax credits again. So what we're effectively looking at doing
is replacing all these systems every ten years because of
how the credit is managed and how it's laid out.
But instead of having you know, you could you can

(42:04):
have nuclear power plants that last eighty plus years. You
could build building you know, cold that last sixty fifty
to sixty years, gas power plants the last forty to
fifty years. You could be building these long lived assets. Instead,
we're going to be building these short lived assets that
have to be replaced over and over again. And that's
if I understand it right, that's one of the reasons
that we're seeing such high cost is not like we're

(42:25):
making some kind of big upfront investment that then will
pay off over time. Is we're going to have to
replace these things again and again just over this twenty
five year period. Am I right about that.

Speaker 3 (42:34):
Yeah, the cost is growing and getting worse, which is
exactly why the urgency needs to be now for everyone
in Congress, not just Republicans but Democrats too. They've unleashed
a ticking time bomb that will continue to grow, just
like roots within a tree, that it's just going to
get deeper and deeper into the soil and continue to spread,
and you won't be able to uproot it the same

(42:55):
way that we can right now as it's still flowering.
But we're looking at right now, let's say twenty twenty six,
the estimated cost of the PTC and ITC in twenty
twenty six is roughly fifty billion, sixty billion. We're looking
at ten years later from that over one hundred and
twenty billion, and then ear years after that. Yeah, in

(43:17):
twenty forty, we're looking at one hundred and fifty billion
dollars just for the PTC in the ITC. That's larger
than so many government programs, things like the DoD you
have specific entire departments like the Marines, gets far less
funding than what the PTC alone will be receiving.

Speaker 2 (43:36):
Yeah, this is all money, especially if if you're a
Democrat that wants to preserve you know, entitlement spending. This
is money that's taken away from that. You're either going
to have to cut into that or you're going to
have to fund more depths at spending, which is going
to actually drive inflation up over the next twenty years
in order to keep paying for this going forward. So
I think there's there's an argument for both parties to

(43:57):
be made that this is money that should not be
going out door, and it could you know, and it
could be used to pay down the debt or to
fund other programs that are that are you know, much
more necessary. So yeah, no, thanks, thank you, Thanks Joshua
for kind of laying it out, for giving this audience
just a sign of a sample of how massive it is,

(44:19):
and also how important it is that the Congress act
on this right now and not give into the voices
that are just looking at the next election and and
looking at you know, well, I don't want to I
don't want to take this money away that's being given
to my district and et cetera, and try to look
at the larger picture of how this is impacting the
country and how important is that we, you know, take
these actions now. So hopefully I get to talk to

(44:39):
you again soon with some better news reporting back on
the elimination of these these subsidies, hopefully in the next year.

Speaker 5 (44:46):
So thank you so much having me.

Speaker 3 (44:47):
Hopefully I can come back on when we repeal all
these all right, thank you.

Speaker 2 (44:51):
This is the Energy Mix Radio Show. I'm your guest
host friend Bennett, and thank you for listening today.

Speaker 1 (44:54):
The Energy Mixed Radio Show is where we explore topics
that affect us all in the oil and gas industry.
Every week, our host will interview the movers and shakers
in this fast paced industry. You'll hear from industry experts,
elected officials, and many more on the Energy Mix Radio Show.