Tyler Cowen confuses "deregulation" with "getting rid of regulations affecting the energy industry." Cowen, commenting on Paul Krugman's energy pessimism, writes:

It's worth noting that if we had to build today's energy infrastructure working under the current regulatory and NIMBY burden, it probably could not be done. So it shouldn't be surprising that building a new energy infrastructure is proving so hard. There's a reason why many of us think deregulation is a big issue and it's not because we want to see people poisoned by Chinese botchagaloop.
Cowen is one of my favorite bloggers, but he clearly misunderstands the NIMBY issue. Deregulation would do absolutely nothing to solve the NIMBY problems that have helped stunt the growth of our energy infrastructure. The NIMBY problem occurs almost exclusively at the local level. Residents don't want coal-fired power plants, refineries, and pipelines in their community, so the local government uses land use regulations to block their contruction. The local government can simply rezone the property for non-commercial use, refuse to issue the proper building permits, etc. When a local government blocks a new power plant or waste-to-energy facility like this, it is not regulating the energy industry; rather, it is regulating the use of the land. So even if we completely "deregulated" the energy industry, Con Ed still wouldn't be able to build a new energy facility if the local government didn't want it. The federal government doesn't have the authority to force local communities to allow the construction of energy infrastructure. State governments can limit the ability of local governments to block construction with land use regulations (unless the state constitution provides otherwise, which is extremely unlikely). In fact, a lot of states have been forced to step in and exert some control over the siting of hazardous waste facilities, which also run into fierce NIMBY opposition. The NIMBY burden on the energy industry represents a classic free-rider problem. Everyone uses energy, but no one wants energy facilities to be in their community. Deregulation of the energy industry would do nothing to solve this free-rider problem. A small-scale deregulation of land use -- which I wholeheartedly endorse -- would ease the NIMBY burden, but that's a completely different issue.


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