Musings on Economic Freedom from the Texas Public Policy Foundation's Center for Economic Freedom

Yesterday, Luminant, Texas' largest power generation company, announced that it will close multiple generating plants and mining operations in Texas that will cost Texans over 500 jobs.

The announcement is in response to the Environmental Protection Agency's new Cross-State Air Pollution Rule designed to reduce emissions of sulfur dioxide and nitrogen oxide. As the Foundation's Kathleen White wrote, the rule is "fraught with false assumptions, specious logic, and technical errors." In other words, it isn't going to do anything to improve the quality of our air, especially in Texas.

Yet this is more than simply an ineffective rule. The impact on the Texas economy will be significant. It will eliminate jobs, threaten the reliability of our electricity grid, drive up the cost of electricity, and lower economic growth.

This is nothing new, of course. Recent interventions in the energy market-including renewable energy and energy efficiency mandates-have added greatly to the nation's economic woes.

Regulatory intervention in Texas' world-class electricity market has increased prices as well. As seen in our commentary, Three Lessons from the Heat Wave, more intervention may be on the way in response to calls for changes in Texas' energy-only market.

The thin margins we experienced this summer due to record heat have led to more concern about the adequacy of reserves in our energy-only electricity market, where investors rather than consumers bear the risk for building new generation. However, the concerns should not be focused on the market itself, but on what government intervention has done to the market. These interventions-which include subsidies and price caps-actually increase electricity costs for consumers/taxpayers while lowering some market prices, reducing the price signals that would normally bring more generation online.

The Center for Economic Freedom will be doing more research on this issue. In the meantime, please read our recent paper, Texas' Economic Leadership Due to Our Leadership in Limited Government Policies that discusses how our policies have allowed the Texas energy sector to thrive and benefit Texans.