You Can Ignore Reality Only by Ignoring the Risk of Unacceptable Outcomes

By Anthony Carbone

Let’s start on the above theme with a capsule summary of the Biden administration’s energy policy. In the short term, the intent is to restrict the supply of fossil fuels, thereby driving up prices relative to renewable energy sources. Longer term, the objective is ultimately to deconstruct the oil and gas industry and limit production to approved, hard-to-decarbonize applications. The “forcing functions” that underpin this strategy include:

a) promulgating legislation and mandates adverse to the industry,
b) implementing permit and regulatory actions to block new drilling leases, pipelines and natural gas terminals, and
c) pressuring potential investors and lenders to withhold capital from the oil and gas industry.

Maybe this definition of our energy policy and objectives doesn’t square up with your interpretation, but keep in mind that:

a) Biden promised unconditionally during his campaign that he would work toward eliminating fossil fuels by 2050. He has not equivocated on his earlier comments to date.

b) More recently, John Kerry (Yale ‘66), the U.S. Climate Envoy, commented in a Bloomberg interview: “We have to put the industry on notice. You’ve got six, eight years, no more than ten years or so, within which you’ve got to come up with a means by which you’re going to capture emissions.” He added: “No one should make it easy for the gas interests to be building our 30- or 40-year infrastructure, which we’re then stuck with…” Kerry knows that technologies to capture CO2 emissions are a long way from being scalable. He also knows that no one will invest in building new pipelines if gas is time-limited to less than a decade.

c) Lastly, Biden defied all inflationary logic and announced that the administration would not be offering leases on government land in the Alaskan bays and the Gulf of Mexico offshore oil fields, two locations with large proven reserves. He also announced that the royalties paid to the government by oil producers will increase by 50 percent on all future leases.

All of these policy positions are a clear indication of how uncompromising the administration is toward restoring any semblance of energy independence, presumably to avoid provoking Green New Deal advocates and risk losing momentum in the conversion to renewable energy. They still don’t grasp the real problem: the forced transition to green energy is distorting energy markets, creating systemic price pressure, and destabilizing the grid.

That is the reality of the moment. But ignored in this overwhelming focus on renewable energy is a long list of potential, unintended consequences that are not disclosed or accounted for in our implementation plans today. I will next highlight a few of the unintended consequences that could develop if our elected officials continue to override our market-driven economy.

Our affinity for and absolute reliance on the 2015 Paris Climate Accord, generally regarded as the genesis of our intense focus on renewable energy, is the first and unquestionably most dangerous tripwire I intend to discuss here. This unenforceable pledge concept has become a classic example of “virtue signaling” by the signatories. UN Secretary-General António Guterres put it this way:

“The jury has reached a verdict. And it is damning. This report of the Intergovernmental Panel on Climate Change is a litany of broken climate promises. It is a file of shame, cataloguing the empty pledges that put us firmly on track towards an unlivable world… Current climate pledges would mean a 14-percent increase in emissions. And most major emitters are not taking the steps needed to fulfill even these inadequate promises. Climate activists are sometimes depicted as dangerous radicals. But the truly dangerous radicals are the countries that are increasing the production of fossil fuels.”

In short, he is critical of current global emission levels that grossly exceed interim climate goals. For example, the UN model calculates that global emissions must decline by 43 percent by 2030, compared with 2019 levels, to stay on track to reach longer-term goals. Their most recent outlook anticipates only a 7 percent reduction over this period. Of equal concern, the Glasgow conference failed to reach agreement on commitments from several major carbon emitters such as China, India, Russia, and emerging economies in the Pacific Rim, Africa and South America. So, where does that leave us, when all of the existing signatories except the U.S. and Denmark fail to meet their short-term goals, and there is no enforcement option available to correct this situation?

The above visual is instructive in this regard. It was lifted from the official U.S. document submitted during the Glasgow climate conference earlier this year. You can find the complete document on Google if you are interested. It shows that the U.S. was one of the few countries with significant reductions in carbon emissions, by 17 percent to be exact, from 2005 to 2020. This reduction was due almost exclusively to the fracking revolution that allowed replacing coal and heavy-oil energy production with much lower-emission natural gas…the stuff that our current policies are designed to “leave in the ground.” Looking forward, it is clear that even if the U.S. stays on course and reaches a 26–28-percent reduction in CO2 emissions by 2025 and fulfills its pledge of a 50–52-percent reduction by 2030, the projected global carbon footprint is going to get a lot worse before it gets better. The standard United Nations Climate Model shows the U.S. contribution by the end of the century would be a barely measurable reduction in temperature of one tenth of one degree Celsius. This is because the U.S. will make up an ever-smaller share of emissions as the populations of China, India and Africa grow and use more energy. As Indian Power Minister Raj Kumar blurted out during a recent climate confab: “Net zero is a pie-in-the-sky…. You can’t stop developing countries from using more and more fossil fuels.” He is spot on. Look at what is happening with energy investments in China and India in this regard.

Coal Plant Counts and New Builds

China has 2,363 – building 1,171 more… Total 3,534
India has 589 – building 446 more… Total 1035
The EU has 468 – building 27 more… Total 495
Turkey has 56 – building 93 more… Total 149
South Africa has 79 – building 24 more.. Total 103
Philippines has 19 – building 60 more… Total 79
South Korea has 58 – building 26 more… Total 84
Japan has 90 – building 45 more… Total 135

Projected coal powered plants in 8 Countries…Total 5615

USA has 232- building 0 more…Total 232

Between the two of them, China and India have almost 3,000 operating plants, and plans to build 1,617 more. Even more alarming…the eight geographies shown are scheduled to build a total of 5,615 new coal plants in the immediate future including 27 in the EU. In stark contrast, the US has 232 working plants with no plans to build more.

It would be foolish to believe that China and India will change their policies now—or ever, for that matter. If Chinese belligerence and increasing authoritarianism over the past several years have taught us anything, it is that no amount of trade and international cooperation will cause them to accept Western values. Said differently, trusting China to do anything other than what is clearly in its own best interests would seem to be in direct conflict with history, and poses serious geopolitical risks to the international community.

Here’s another way to calibrate the economic damage from current U.S. climate policies in pursuit of Biden’s 2050 carbon-neutral goal. A new economic study estimates this effort will cost the U.S. 12 percent of our GDP annually in subsidies and tax credits. To put that in perspective, it equates to more than the 11 percent we spent on Social Security, Medicare and Medicaid in 2019. More pointedly, it breaks down to almost 60 times more than what survey results show American taxpayers are willing to pay to achieve Biden’s goal of a net-zero carbon-emissions future.

Conversely, China, our avowed rival for global leadership and military superiority, is sitting on the sidelines unencumbered by any obligation to contribute to the common cause. I submit that as this reality sets in, and our conversion costs become more apparent, more newsworthy and more inexplicable, the voting public will realize that we are over-committed and under-served with our single-minded purpose to transition exclusively to renewables. At that point, our elected officials will tune-up the blame game and rush to resurrect our fossil-fuel and nuclear-energy infrastructure. A similar pivot is already underway in the EU following the outbreak of the Ukraine war. When a growing energy deficit requires a similar reboot here, we will lose the commitment of an entire generation that now passionately believes we have a “moral imperative” to protect the planet from warming. This policy-driven failure is potentially the most unacceptable outcome that I believe lies ahead. I’ll leave it to your imagination to speculate on where we go from there.

Next, I would like to comment on four other issues that could derail our current climate policy and then wrap up with an outline of how I believe we should safely and more efficiently manage the transition to renewable energy.

CLICK TO READ MORE (Part 2): Fossil Fuel versus Renewable Economics, Renewable Infrastructure Environmental Impact, Raw Material Dependency on China, Critical Petrochemical Applications.

 
(Classmate comments are invited at the end of Anthony’s commentary on page 3.)