Biden’s ‘Clean Economy’

Monday, July 20, 2020
Image credit: 
Naypong, Shutterstock

When it comes to climate change, Democratic Presidential nominee Joe Biden repeats one of the most common errors of public policy: He thinks that his noble political ends justify his ham-handed means. His goal is “to achieve a carbon pollution-free electricity sector by 2035”—and he plans to spend two trillion dollars in  public funds to achieve it.

But Biden ignores the fact that designing a sensible policy program involves a large number of complex trade-offs. He justifies his plan by pointing to what he claims are the deleterious consequences of increased carbon dioxide emissions—and by noting that his plan will create jobs. He wants nothing short of a “clean-economy revolution.” He castigates the President by saying: “When Donald Trump thinks about climate change, the only word he can muster is ‘hoax.’ When I think about climate change, the word I think of is ‘jobs.’ Good paying union jobs, no less.”

But why do we need such a revolution? Biden doesn’t point to any evidence that the oft-touted worst-case scenarios from climate change have, or will, come to pass. In fact, even a brief look at the evidence points to a very different conclusion. During the past ten years in the United States, energy efficiency has increased by every available metric. Coal consumption, for example, fell from 975 million short tons in 2010 to 539 million in 2019, at a time when GDP increased from about 15 trillion dollars to about 21.5 trillion. This means that GDP output per ton of coal increased by close to four-fold. At the same time, a study shows that increased global greening due to higher levels of carbon dioxide “may have slowed the rate of global warming possibly by as much as 0.2 to 0.25 degrees Celsius.” The current state of play counsels against major changes in U.S. energy policy to combat global warming.

Then there’s Biden’s claim about jobs. He rather optimistically believes that his green economy will produce 10 million new jobs. At best, this number is plucked out of a hat. At worst, it represents a misguided form of economics. Along these lines, the World Resources Institute crows that the clean energy economy has already created 3.5 million new jobs, a number that will surely increase if the Biden proposals are adopted. But do those jobs really represent the best use of scarce resources? In promoting a Biden-like approach, the World Resources Institute boasted that “$1 million spent on fossil fuels in the U.S. will generate 2-3 full-time equivalent jobs, while $1 million spent on renewable energy or energy efficiency will create 7-8 jobs.”  But these numbers  imply that labor in the fossil fuel industry is two to four times more productive as it is with wind or solar energy. More energy for fewer dollars releases valuable resources for other uses.

Recall that the total contribution of wind and solar to the energy mix in the United States is about 6.94 percent and 2.7 percent respectively, whereas fossil fuels account for about 80 percent of total energy. Standing alone, these numbers do not convey either good or bad news. If those relative yields are the result of competitive forces, then renewables represent a useful addition to the portfolio of energy resources. But that’s not so if those numbers reflect market distortions introduced by the use of subsidies for fossil fuels and clean energy sources.  

In that case, those figures must be corrected to reflect the actual efficiencies. On that score, the verdict is not close. Cash subsidies for renewables have increased in recent years, with 80 percent of the $100 billion subsidy coming in the last decade. It does not work to argue that these subsidies should be retained because similar subsidies have been given to the fossil fuel industry. The appropriate response is to end both subsidies rather than pushing more funding in wind and solar energy, as Biden wishes.

Additionally, much rhetoric is spent condemning fossil fuels for their adverse environmental effects. But don’t forget that wind and solar bring major problems of their own. Wind turbines generate nuisances that can be harmful on a protracted basis and kill large, slow-moving birds. Solar panel ground coverings can also have adverse effects on local environments. These problems are exacerbated by the relative and largely irreducible inefficiency of renewables. The great advantage of fossil fuels is that they are storable and stable at low cost. Because fossil fuel sources are energy intensive, they take up far fewer acres of land than are needed for either solar panels or huge windfarms.

It is also imperative to consider the huge difference in the cost of generating and transporting crude oil or natural gas compared to that of wind or solar energy. The Biden approach does not make such fine distinctions. Biden condemns Trump as “un-American” for his decision “to focus only on the technology of the last century, instead of inventing the technologies that will define this century.” Biden is referring to the Trump administration’s defense of fossil fuels and the President’s persistent effort to bring and keep new pipelines on line.

But the backward thinking is all Biden’s by doubling down on the Obama administration’s consistent opposition to state-of-the-art pipeline construction, even though that technology is far safer and more efficient than the similar technology a generation ago. Modern pipelines are buried underground, out of harm’s way. By comparison, wind turbines and solar panels are always subject to the elements, such that even if the energy is renewable, the equipment used to capture and transfer it requires constant upgrade and maintenance, not to mention the heavy costs of installation and removal.

As has been observed countless times, neither solar nor wind energy can be stored for future use like fossil fuels. Beyond that shortfall, clean energy depends on the sun shining and the wind blowing. Those are, of course, the times when energy is needed least, so elaborate systems are required to eliminate excess quantities of energy. Absent sufficient means of short-term energy storage, this is often achieved by shutting down panels and turbines just when they are operating at peak efficiency. On the other hand, reliable energy sources are still needed when the wind does not blow or the sun does not shine, making it necessary to find auxiliary sources to take up the slack. As the Sierra Club notes, these additional energy requirements are often met by burning dirty coal.

Strenuous efforts are now being made to overcome these major disadvantages through the creation of solar batteries to store excess energy for future use. If they work, they should shift the balance of convenience in the direction of solar power, just as improvements in fossil fuel technology could shift it back in the other direction. But future uses and technological innovations should be determined by market forces, not by government interventions.

Unfortunately, Biden’s proposal rests on the implicit assumption that these alternative energy sources are scalable, such that their use increases their efficiency. No evidence supports this position. Problems already evident at the current levels of production will become ever more acute as the fraction of energy from these two sources increases. Once wind and solar reach 20 percent of supply or more, the frequent fluctuations in production will put additional strains on the system, reducing whatever cost advantage may be available. It is therefore important to note that the shift away from fossil fuels will generate new costs as well as new efficiencies. One key question is how to choose  the optimal mix of various energy sources.

Here it is critical to observe a fundamental asymmetry between the uses of accurately calibrated taxes or regulations and subsidies on alternative energy sources. Taxing or regulating these energy sources can counteract environmental externalities. As a consequence, all rival technologies are given the same competitive boost when the dirty technology comes only at a higher price. Subsidies do not have that desirable effect, because some governance agency has to decide which energy form and which firms to subsidize and which to leave be. Well-heeled firms and well-organized industries will lobby to get subsidies. Doling out subsidies puts the government in the dangerous business of trying to pick winning technologies, a game in which private investors are far more skillful players.

The Biden program is long on aspiration and short on substance. As is often the case, Trump’s rhetoric may generate lots of enmity, but his actual program is far superior to the overconfident and ill-informed Biden proposals.


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