“We are quite in the electric way. We boast that we have made electricity our slave, but the slave whom we do not understand is our master. And before we know him we shall be transformed.”
—Charles Dudley Warner “The Electric Way”
“We will all burn together when we burn.”
—Tom Lehrer “We Will All Go Together When We Go”
On June 13, 2015, Minnesota DFL Governor Mark Dayton signed an omnibus energy bill sent to him by the Republican-controlled state legislature. Donald Trump announced his candidacy for the President of the United States three days later. At the time, many energy policy experts—at least in Minnesota—would have predicted the former would have more lasting effects on state policy and the global climate. Many things have changed since 2015.
Nevertheless, one small part of the omnibus energy bill that came into effect that summer is having a largely unnoticed but lasting impact on Minnesota and the world. Buried within the legislation is a policy that is making its mark on Minnesota’s water and the world’s climate—Minnesota Statute § 216B.1696, the “Competitive Rate for Energy-Intensive, Trade-Exposed Electric Utility Customer” subsection. This legacy of policymakers’ efforts to support resource extraction and export industries imposes high costs on Minnesotans.
Who is an Energy-Intensive Trade-Exposed (EITE) Utility Customer? What is an EITE rate, and what does it matter if Minnesota hands it out to the largest consumers of energy in the state? This article seeks to introduce these concepts without getting too deep into the economic theory or political horse-trading behind the law’s enactment.
At its root, an EITE rate is a subsidy that is only granted to “Trade-Exposed” large users of energy. In Minnesota, it seeks to increase production and resource extraction by statutorily-defined “Energy-Intensive” industries that receive consistent support from politicians across the political spectrum. These companies see a profitable upside to acquiring their electricity at deeply discounted rates.
The resultant downside to an EITE subsidy can be remarkably broad, however, touching Minnesotans’ livelihoods and shared resources alike. While the money generated by the subsidized industries is mostly funneled out of the state, the externalities created by these industries—often in the form of water pollution—remain on Minnesota’s ledger. Additionally, the ostensible purpose of an EITE subsidy is to offset and adjust for comprehensive climate change policies, which Minnesota does not have. As a result of this counterweight to controls that do not exist, the EITE subsidy funds pollution impacting Minnesotans and the world, while profits are realized primarily by out-of-state interests.
This article attempts to describe both climate change pollution impacts that are local to Minnesota, and the longer-term global social cost of carbon. In the world of climate change economic theory, the word “leakage” is a term of art. Normally: “carbon leakage occurs when a developed country threatens or puts restrictions on carbon emissions (cap-and-trade, for example) into effect, and subsequently emission-dependent industries relocate to countries with no emissions restrictions.” Relocation to a country with weaker standards on climate pollution is “leakage,” because the pollution leaks out of regulatory controls despite a strong standard in the original jurisdiction. Leakage could ultimately lead to larger total greenhouse gas (GHG) emissions over time. Turning the normal concept on its head, Minnesota’s failure to restrict carbon emissions, paired with its subsidy on the most energy-intensive industries, attracts leakage to the state—pulling production from other countries that might have better regulatory control on the same industries.
The discussion that follows attempts to cover global issues and international law while also touching on Minnesota law and specific facilities. This article first discusses the theory behind EITE rates before addressing how the issue has been handled in Minnesota. It then turns to the EITE subsidy’s impacts on Minnesota’s economy and the local and global environment. Finally, it addresses how export subsidies on goods are usually treated under international trade law applicable to the United States.