Energy Efficiency and Conservation Block Grant Program (EECBG)

The Energy Efficiency and Conservation Block Grant Program (EECBG) was created as part of the the American Recovery and Reinvestment Act (Recovery Act) of 2009.  The program was authorized in Title V, Subtitle E of the Energy Independence and Security Act (EISA) and signed into law on December 19, 2007 by President George Bush.(EECBG Home Page) It was the first time the Department of Energy (DOE) has given money to municipalities.(ACEC Webinar)  It authorized the DOE to redistribute $3,200,000,000 of tax payer money to local communities for 14 types of activities.  The EECBG slogan is “Spend Fast and Spend Well”.(ACEC Webinar)   The money has already been allocated based on an allocation formula. (EECBG Allocation Page)

The top four activities the applicants chose to use the money for were Energy Efficiency (EE) retrofits, EE and Conservation Stratagy, EE Programs and Buildings, Traffic Signals and Street Lighting.  Additional activities included, Energy Audits, Building Codes and Inspections, Renewable Energy Technologies on Government Buildings, Development and Implementation of Transportation Programs and Energy Distribution Technologies.(EECBG Home Page)  Also included is the development of public education programs to increase participation and efficiency rates for recycling programs.(US Mayors PDF)

The purpose of the program is to “assist state, local, and tribal governments in implementing strategies to; reduce fossil fuel emmissions; reduce energy use; improve energy efficiency in the transportation, building, and other appropriate sectors.”(EECBG Home Page) The EECBG program has a three pronged goal; to reduce harmful emissions, improve energy efficiency, and as part of the Recovery Act, improve the economy.

According to the government, the way to reach this goal is by financing devolopment and dictating how municipalities engage in the development of their communities.  In effect using the municipalities as extended arms of the federal government.  The projects are then performed by government controlled, but privately owned, engineering and construction firms.   The projects must comply with buy american guidelines, historic preservation guidelines, environmental guidelines, hiring guidelines, loan guidelines and reporting guidelines which are vaguely defined by the authorities. (EECBG Guidance Page) In the end municipalities must ask the federal government for permission to start a particular project.  In order to determine whether or not an idea is permissible a municipality can contact the General Counsel Hotline, use Technical Assistance Resources and refer to the EECBG program guidance page. (ACEC Webinar) Hereafter I use the term Central Planning to describe methods used by the DOE.

Defenders of the EECBG program argue that when profit-seeking businesses “decline to embark upon such unprofitable projects, it is the duty of government to fill the gap. Government should either run them as public enterprises or it should subsidize them in order to make them attractive for the private entrepreneur and investor. …[T]he government’s interference enables submarginal producers to continue producing and to stand the competition of more efficient plants, shops, or farms. Here, they say, it is obvious that total production is increased and something is added to the wealth that would not have been produced without the assistance of the authorities.”(Mises p.660)

While it is true that many such projects would never be born if not for the coercive efforts of government, it does not mean that individuals benefit from these projects more than from the otherwise freely chosen projects.  Everything that is brought into existence by subsidies, causes the abortion of values that would have otherwise been born.

In my view, the goals of the EECBG program will never be reached as intended.  Of the three goals, only one can be accomplished.  The EECBG program can do the only thing force can accomplish in the long run.  It can stop things from happening.  In this case, it can reduce carbon emissions, but the longterm goals of increasing energy efficiency and economic growth are in conflict with the forceful nature of redistribution of wealth and Central Planning.

If the $3,200,000,000 had not been taxed or inflated away from entrepreneurs, the money would not have been invested in EECBG projects.  The municipalities would have kept their less efficient energy systems in place until they had enough money to retrofit them.  However, the new systems purchased with grant money can, at best, increase energy efficiency (in the short run) and provide a certain amount of alternative energy, thereby reducing carbon emissions.

In the long run innovation and the production of new and efficient energy systems are thwarted.  No person or body has the omniscient knowledge to know what the best methods of production are.  Under capitalism thousands of entrepreneurs searched in every direction for the most profitable method to produce energy and brought us from burning wood and whale blubber to the wide range of fuels available today.  Subsidies thwart this evolutionary process by distorting the thought process required for long rage planning. Subsidies and Central Planning work together to force production methods into one small basket of options. Forcing Americans to act in a certain way cuts off their ability to think and replaces thought with obedience.  The unintended consequence is a drop in the productive capacity of the American economy.  This drop in production will reduce the amount of energy used by Americans, thereby reducing fossil fuel emissions, further accomplishing goal number one.

$3,200,000,000 of mis-allocated wealth caused people to enter into professions that would have been otherwise non-existent.  They produced goods that consumers would have otherwise not chosen.  This diverted money away from freely chosen investments and products and forced it into municipal retrofit projects.  When the projects are over the mis-employed people will feel the pain of job loss and lack of desirable skills.  If the people remain ignorant of economics and individual rights, they will demand sustained subsidies for their irrational and unprofitable actions.  As an example of how this theory comes to life, take a look at Evergreen Solar Inc. in Massachusetts.

A solar panel manufacturer that received $58 million in state aid in 2007 to open a factory at a former Massachusetts military base is closing the plant and laying off 800 workers (AP Wire January 11, 2011).

It is difficult to examine the results of the EECBG program.  The Energy Empowers web site is supposed to contain EECBG success stories. As of April 10, 2010, there was only one vague article that said the following.

“Substantial energy efficiency improvements will be made throughout the state,” says Dari Sassan, EECBG coordinator for NHOEP. “Through this program, we are going to be able to fund116 innovative projects in 65 communities that will save money and stimulate the local economy,” he explains.(Energy Empowers)

No matter what short term success stories eventually appear, the EECBG program is doomed to fail in its efforts to increase energy efficiency and economic growth in the long run.  The best way to increase efficiency and economic growth is for a government to protect individual rights.  Government should focus its efforts on better defining and protecting individual rights. Instead of taking EECBG grants, local governments should sell or abandon the property they are unable to manage, including roads, public transportation and utilities.  Individuals and voluntary associations can easily perform these relatively simple tasks.  If the government worked to define and defend property rights for utilities and roads, private citizens would embark a thousand different ways to solve transportation, wastewater, drinking water and energy needs.   There is no law of nature that states man must travel by car on asphalt roads or that sewage must be sent through pipes across town to a treatment plant.  These antiquated ideas only get entrenched by government decree and regulation.

References

EECBG Home Page http://www.eecbg.energy.gov/about/default.html

EECBG Allocation Page http://www.eecbg.energy.gov/about/Allocation.html#allocation

US Mayors PDF http://www.usmayors.org/climateprotection/documents/eecbghandout.pdf

EECBG Guidance Page http://www.eecbg.energy.gov/about/program_guidance.html

Mises, Ludwig Von. “Human Action”

Energy Empowers http://www.eereblogs.energy.gov/energyempowers/search.aspx?q=eecbg