The Empire State’s ugly war on energy

New Yorkers are paying far too much for the essentials of modern life.

For evidence, look no further than the gas pump: State taxes add about 50 cents to each gallon of gas and diesel, the second-highest gas tax in the country.

And New York’s electricity prices are the fourth-highest in the nation. That impacts more than just your monthly bill; it adds to overhead for every business in the state, one reason for the drastic decline of the Empire State’s once-thriving manufacturing sector.

It doesn’t have to be this way: Burdensome taxes and regulations are a big part of why New York’s energy costs are so high.

Our recent study for the Pacific Research Institute analyzes the impact of state energy regulations on economic efficiency. The 50 State Index of Energy Regulation ranks states from those with the most economically efficient energy policies to those where regulation impedes efficiency the most.

New York is dead last.

Impeding economic efficiency comes with a cost. Lifting unnecessary regulations would give New Yorkers a hefty raise — and spur economic growth.

New Yorkers consume around 7 billion gallons of motor fuel each year, so the 50-cent-a-gallon fuel tax costs residents and businesses around $3.5 billion a year.

Lowering fuel taxes closer to the national average (31 cents a gallon) would put millions of dollars back in consumers’ pockets. Newly flush with cash, they could spend or save more — and so stimulate the state economy.

New York also has some of the strictest “renewable portfolio standards” in the country.

These require energy firms to generate considerable power from renewable sources like hydroelectric dams, wind, solar and biofuels. The exact target has been rising since the state imposed the rule in 2004; it hits 30 percent of all electricity next year.

Mandating the use of “renewables” is supposed to help the environment. But it really just jolts consumers’ electric bills. It’s much more expensive to generate energy from renewables.

Wind energy can cost up to 2.5 cents more per kilowatt-hour than traditional sources. New York uses more than 160 billion KwH each year, so those pennies add up quickly.

New York’s energy needs will expand by as much as 10 billion KwH over the next decade to meet expected demand. Much of that must come from renewables, thanks to the state mandate, so New Yorkers can expect to pay much more for electricity than they would without such regulations.

Other regulations are also needlessly driving up energy costs. New York is a founding member of the Regional Greenhouse Gas Initiative, or RGGI — a “cap and trade” initiative involving nine states.

Such programs require energy producers to acquire permits for the right to emit carbon dioxide.

Energy companies inevitably pass these costs on to consumers.

Cap-and-trade’s goal is to cut carbon emissions. But the US natural-gas boom is decreasing carbon emissions without increasing costs for consumers. Emissions in the nine RGGI states are now 45 percent lower than the capped limit.

What’s more, the Congressional Budget Office concluded that the RGGI had a “negligible” impact on reducing carbon emissions. It’s time for New York to follow New Jersey’s lead and leave the program.

New Yorkers are paying in another way — via taxpayer subsidies. The state government offers more than a dozen different “green energy” tax credits, rebates, grants and loan programs.

One big winner was SpectraWatt, a Fishkill solar-cell company. It got $20 million in state and federal subsidies in 2009 and 2010. In 2011, it went bankrupt.

Then, of course, there’s New York’s ban on fracking, the oil- and gas-drilling technique that’s boosting employment across America.

The ban has frozen the Empire State out of the natural-gas bonanza. Right next door, Pennsylvania has embraced the fracking revolution, becoming the No. 2 natural-gas-producing state.

A Penn State study surveyed the state’s producers and estimated that exploitation of the Marcellus Shale (which extends well into New York) supported 180,000 Pennsylvania jobs in 2012.

If New York adopts reasonable fracking regulations like Pennsylvania’s, the Empire State should see similar economic benefits.

The bottom line: Energy is vital to prosperity. New York should reform its over-regulated energy market — both to save consumers money and boost economic growth.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

Scroll to Top