Energy Lobbying, Environmental Costs, and Zero-Sum Competition

Exelon Corporation, one of the largest energy companies in the United States, has come out in favor of the EPA's Clean Power Plan and has even asked for a carbon pricing schema. This stands out, as one does not typically expect to see large energy companies endorsing aggressive carbon regulation. And I should hasten to add that what follows is not a specific speculation on Exelon's motives. Exelon might have any number of reasons for the position it's taking, not the least of which could be a fear that absent their intervention the EPA plan could end up being more environmentally protective (and thus more economically burdensome). Nonetheless, in general it does seem a little odd: why would an electricity company support EPA rules that almost certainly would place greater costs on its line of business.

The answer might lie in the difference between competitive and monopoly electricity markets. In the former there are multiple firms competing for customers and market share. In the latter, there is a single firm with a guaranteed franchise and customer base. These two models have been struggling for primacy in the electricity sector for the past several decades -- as it stands, we have competition in the generation and wholesale sectors, whereas most (but not all) states have maintained a retail electricity monopoly. At first glance, though, this different market structure is unrelated to support of greater environmental regulations. For either it increases costs, and we can stipulate (though this may or may not be true) that it equally increases costs for firms operating in a competitive versus a monopoly context. It is therefore unlikely that any firm will unilaterally adopt superior environmental restrictions (with some allowance for trying to gain public goodwill or carve out a unique market share). And so it seems unlikely that any firm would lobby to put in place a regulatory regime which increases these costs.

But look a little closer. For the monopoly firm, a policy proposal which increases its costs is an unmitigated bad. The cost increase may be minor, in which case it will be moderately opposed, or significant, in which case it will be significantly opposed, but there is never a corresponding benefit to the cost increase. But in a competitive world, things are different because there is also the opportunity to take over one's competitor's turf. Here, cost increases can be a good thing if one is in a position to better ride them out than one's adversaries. Imagine Company A has already significantly invested in renewable energy infrastructure such that new carbon mandates are likely to only cause a small price increase. Company B, by contrast, is less prepared to handle these new mandates and would be forced to increase prices quite a bit. Company A may well lobby for the regulatory shift because it would give it the opportunity to gobble up market share currently held by B.

This matters because it suggests that, in a competitive context, there is sometimes a business incentive for firms to lobby on behalf of cost-increasing environmental regulation where it feels it can better absorb the costs compared to other companies in the field. To the extent that environmental regulation often in practice needs business buy-in to be effective, this is an avenue worth exploring.

I said that this was not a speculation on the Exelon situation, particularly, and it isn't. That said, I did notice that the speaker who delivered this missive to FERC was described as "Exelon’s senior vice president of federal regulatory affairs and wholesale market policy." If Exelon's wholesale division (remember that wholesale electricity is a competitive sector) thinks that it is better positioned than its rivals to meet EPA carbon requirements, then that would explain why it would come out in support of this initiative even though in absolute figures it probably will raise its cost of doing business.

Cleanup Roundup

We're moving next week, and so the slow process of cleaning and organizing our apartment begins.

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Rep. Steve King (R-IA) may be one of my all-time favorite Republican crazies. Here, he frets that women who have access to free birth control will never birth again. Ain't no pregnancy like an involuntary pregnancy!

Lithuanian mayor runs over luxury car parked in a bike lane with a tank. Bring him stateside.

FYI: Black family life in the antebellum south really sucked.

The other day, Jon Chait raised a specter of hope regarding the debt compromise, arguing that the "default" cuts in defense spending will cause lobbyists to work feverishly to avert them via revenue increases. Today, Matt Yglesias puts the kiboosh on it.

Eating while Black.

Frankly, I think Jennifer Rubin's Norway post scarcely makes the top ten reasons she should be axed from the WaPo. Alas, the ombudsman disagrees.

The Anti-Obama

Haley Barbour makes the pitch:

Haley Barbour, the chairman of the Republican Governors Association and one of the most powerful Republicans said to be considering a run for president, is making the case that his southern accent and lobbying career might make him exactly the kind of candidate who can mount a successful campaign against President Obama.
[...]
"As far as southern accents and Mississippi, this country may be looking for the anti-Obama in 2012. Don't know. Could be," Barbour continued.

A corrupt lobbyist with ties to White supremacists? Yeah, that's the anti-Obama alright.

Give Him More Rope, Part III

Yes, the honesty is refreshing, but Haley Barbour is like a sick parody:

But I will know this: if I run for President, what you see is what you get, and I am from Mississippi, I do have a southern accent. I was a lobbyist and a pretty damned good one. And I'm very proud -- we were talking before the show came on -- I am happy about my life. I've got a great marriage. I've got great family, and I've had a great career. Wouldn't do anything differently."

"And I will tell you this -- the next President of the United States on January 21, 2013 - - is going to start lobbying. He's going to be lobbying Congress, he's going to be lobbying other countries. He's going to be lobbying the business community. He's going to be lobbying the labor unions, the governors, because that's what Presidents do, and I feel like it's an advantage for me to have the chance to do that."

Please oh please nominate this man. Nominate the man who wants to brag about his time as a lobbyist.

Of Interests and Lobbies

As someone who found The Israel Lobby thesis to be profoundly misguided, it really shouldn't be any surprise that I find its new counterpart, The Arab Lobby, to be pretty silly as well. Hussein Ibish reviews the latter here, though I wish he had provided more specific examples about where he thinks the authors go off the rails, the broad points are sound.

In general, the problem with these sorts of arguments is twofold. First, they nearly always have an insanely reductionist account of "American Interests", creating an implicit baseline of what the U.S. "would" be doing were it not for the "lobby", and then measuring the lobby's influence based on how far it can get us to deviate from our basic interests. But that's not the way interests work--we don't just have interests in the abstract; we're interested in various principles, resources, and situations, all of which are open to political and democratic contestation, and lobbies usually try and convince policymakers to adopt one constellation of interests over another. So yes, if the U.S. really didn't care about democracy (adopting a pure W&M-style neo-realist framework that only cared about defensive security) our position regarding Israel would probably change; if the U.S. really did care about democracy our position regarding Egypt would change. We blend lots of interests together, in a variety of cocktails. And that's okay.

Second, they usually collapse many different perspectives under a single heading. Ibish claims that The Arab Lobby does this by creating blanket groupings of organizations as either "pro-Israel" or "pro-Arab", we know Mearsheimer did this with his wretched list of good and bad Jews. I agree in principle that we can characterize groups ranging from J Street to ZOA as "pro-Israel" in some sense or another, but it seems very bizarre to characterize them as being part of a cohesive "Lobby".

And this, in turn, gets at the fundamental problem with these comparisons between the power of the "Israel Lobby" and the "Arab Lobby"? When you define the Israel Lobby as broadly as do Walt and Mearsheimer, encompassing everyone from the ZOA to J Street, the only thing they have in common is that they don't want Israel to die. Is the sentiment amongst US policymakers that Israel shouldn't be destroyed stronger than their sentiment that, say Saudi Arabia shouldn't be destroyed? I guess, but (unlike with Israel) the potential destruction of Saudi Arabia isn't really on the geopolitical table. In terms of more specific policy initiatives where "the Israel Lobby" is internally divided, it becomes more difficult to sustain claims of unique power. Israel gets lots of American weaponry and aid; so does Egypt and Saudi Arabia. America has security guarantees with Israel, but it likewise has them for Arab neighbors.

Given the unstable nature of concepts like "interests", the widespread disagreement over what it would mean to "support" Israel or Arab "interests", the differing geopolitical contexts which mediate what each group has to request and how much pushback their is against their demands, the question of whose Lobby is bigger is effectively meaningless. These questions are nearly always used as a smokescreen (author protests notwithstanding) to act like somebody is subverting the true needs of the American nation, and I find it aggravating.