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A National Energy Plan That Could Work

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An interesting article by Claudia Cattaneo in the Financial Post discusses the collapse of the decade-long push for a "National Energy Strategy:"

"After nearly a decade of calls for a national energy strategy by a cacophony of interest groups with different priorities, the idea seems to have drifted to the sidelines. Even Alberta, which recently led the charge, has recalibrated its views and efforts to a more realistic level.

In short, Alison Redford's government is pursuing engagement on energy -- i.e. conversations -- with other provinces rather than a Canadian Energy Strategy in the traditional sense -- a pact that requires consensus from all interested parties."

Cattaneo goes on to explain that various energy initiatives, such as a plan to convert one of TransCanada's existing natural gas pipelines into an oil pipeline from west to east, came about through discussions with only the relevant parties, which enabled greater cooperation.

This is only logical: energy production is a highly regional activity, where different natural endowments create very different opportunities and challenges. One region is rich in hydro, another has extensive oil or gas deposits, while still another may be wealthy in wind. It makes little sense to think that Canada would get better energy policy with planners in Ottawa telling the provinces what types of energy they can produce, and how they can transport that energy to market.

This is equally true in the United States, which also has a contingent of interests pushing for some kind of national energy policy. It has never made sense to expect the people in, say Wyoming, to accept the decision of a distant planner in Washington DC as to what kind of energy they can produce, consume, import or export.

But now and then, as economist Bruce Yandle points out, you get a coalition of "bootleggers and baptists" where groups with seemingly disparate agendas find agreement on some regulatory regime that satisfies both of their desires. His classic example is that both bootleggers and baptists will agree to keep bars and liquor stores closed on Sunday -- the baptists put an obstacle in the way to drinking on Sunday, giving the bootleggers sole access to the market without legal competition. Ms. Cattaneo seems to imply that a similar coalition was the driving force behind the push for a national energy strategy:

The latest push started in 2003 by the Canadian Association of Petroleum Producers with the Canadian Gas Association and the Canadian Electricity Association, and then roped in many other interest groups and think tanks. There is even the Energy Policy Institute of Canada, backed by an array of energy corporations whose singular focus is to promote an energy strategy for Canada.

There are certain general policy principles that should be kept in mind when considering energy policy, many of which derive from an understanding of Freidrich Hayek's "fatal conceit."

"The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. To the naive mind that can conceive of order only as the product of deliberate arrangement, it may seem absurd that in complex conditions order, and adaptation to the unknown, can be achieved more effectively by decentralizing decisions and that a division of authority will actually extend the possibility of overall order. Yet that decentralization actually leads to more information being taken into account."

If Ms. Cattaneo is correct in signaling the imminent demise of the push for a "National Energy Strategy," it's a good day for those who believe in local decision making, and a dynamic, market-based energy economy, rather than a centrally planned, state-controlled energy economy.