Seeing Green … A Roundup of the North Carolina “Green” Budget

North Carolina’s proposed budget for the next biennium is peppered with nods to Big Green. As the following highlights from the House budget (HB 1473) reveal, these measures show that the state is embracing bad economics in an attempt to save mother earth:

• New Green Employees. This year’s House budget proposes adding 37 new Department of Environment and Natural Resources positions. That’s 37 more ways to slow the development of much-needed housing and infrastructure. That’s 37 more ways to drive up the cost of living in North Carolina with marginal-to-no environmental benefit. That’s 37 more people plucked from our robust private sector into a dead-weight-loss bureaucracy. And that’s 37 more salaries North Carolina citizens must bankroll through higher taxes.
• Operation Lights Out. Likewise, the budget includes $600,000 in recurring funds for six new jobs that will go to “State Energy Office Operations,” which aims to “reduce energy consumption in state agencies by 20 percent by the 5-year period ending in 2008.” One wonders if these agencies will even be able to save enough in energy costs to pay for these new state positions?
• More Green Fees. The House budget includes more of the government’s favorite way to tax without transparency or accountability: fees. Such fees are supposed to mitigate purported environmental damage by requiring people to pay for the ecological effects of their commercial activities. For example, the government charges water quality fees to developers. In turn, developers pass these costs on to citizens — that is, you and me. (The proposed House budget raises such fees from $50 to $60 per single-family residence.) Consumers don’t see the costs, but have to pay them anyway. In this way, they’re like a hidden tax. And the government wants to keep it that way.
• N.C. Green Business Fund. The proposed budget offers zero percent interest loans (free money) for so-called “green” business ventures. This represents another attempt by government to shape — i.e. subsidize and distort — energy markets. Negative unintended effects of such distortions include the continued propping up of certain industries (like ethanol) that tend to drive up the price of staple foods and also cause damage to the environment in ways not necessarily related to climate change (e.g., cutting down trees to create more arable land, introducing real air pollution in place of CO2, and causing problems for older underground storage facilities designed to hold gasoline). Biofuels are already heavily subsidized by the federal government. Now the state wants to provide new handouts for green companies — despite the fact that North Carolina’s overall corporate tax rate is higher than all other southeastern states.
• More Corporate Welfare. If a free-loans fund weren’t enough, $2.2 million (cf. Section 1.1. (General Fund Availability, lines 29-30)) has been set aside for a single, as-yet unnamed, company that produces biofuels. The backlash from handouts to mammoth corporations like Google evidently didn’t faze the “economic development” crowd in Raleigh. The justification? Presumably that interfering in energy markets will somehow mitigate climate change at some future point in time. If such intervention is so important, why doesn’t the budget specify which entity will receive this handout?
• Targeted Tax Cuts and Green Ironies. Instead of implementing a fair tax code for all businesses, North Carolina is offering targeted tax breaks to certain industries, namely agriculture and manufacturing. In particular, the House budget seeks to lower these industries’ electricity taxes. This effort in protectionism runs counter to the other green goals implicit in the list above, as these sectors will now use more electricity — thanks to the lower total cost. Of course, more electricity consumption means greater dependence on fossil fuels. Such targeted tax cuts are illustrative of a wider conceit that government is able to manage the economy better than the self-regulating free market.

Some of the above items are a result of the natural tendency of government to expand; others are a result of a confluence of recent factors:

• First, fears of global warming are causing green activists and politicians to cannibalize other environmental goals (for example, the Amazon Jungle is being cut down thanks to the rush to plant new crops, like sugar and corn, needed to satisfy government-created demands for ethanol). Just as green politicians at the federal level seem to be willing to acquiesce in the cutting down of the very symbol of the environmental movement, North Carolina politicians are poised to follow suit.
• Second, green consciousness is a perfect match for the mindset of bureaucrats who also believe they can plan the economy. Why not “bring in jobs” and “go green” all at the same time? Liberal voters will swoon when they get wind of this — despite the thoroughly discredited economics involved.
• Third, business interests are constantly looking for new regulations that will hurt their competition. It’s no wonder the liberal successors of Jim Black are being captured by the “alternative energy” interests, such as natural gas and biofuel companies, particularly when such deals can be done under the mantle of corporate social responsibility. Sadly, the collusion between business and government is only going to deepen in North Carolina as the climate change issue gains traction. This time, however, the backroom deals aren’t going to be about gambling, they’re going to be about getting green.

Instead of showering gifts upon green industries, state legislators truly worried about global warming and the environment should do some things that might actually help. For example, North Carolina could pressure the federal government to lift the moratorium on constructing new nuclear power plants. Nuclear energy is renewable, produces no CO2, and is very competitive with fossil fuels. The state should also stop subsidizing agriculture (particularly for biofuel related products) and encourage the federal government to do so as well. The environmental costs of agriculture subsidies can be terrible (as with Brazilian sugar and Amazonia), but are rarely mentioned by bureaucrats pandering to green constituents who are clueless about unintended economic and environmental effects. Finally, most people care about the environment and love the natural beauty of North Carolina. People who get to keep more of their paychecks are more likely to invest in environmental stewardship projects, conservation (land and water) trusts, and green nonprofit groups. Why not allow citizens to direct their money to those environmental causes that are deemed appropriate and effectual? Indeed, legislators might offer more tax incentives to get taxpayers to do so.