For over four decades, I have traversed the length and breadth of the U.S. energy industry. I went from a teenager confronting apartment managers violating New York’s incinerator laws to a newly minted Princeton Ph.D. chemical engineer working for a major oil company and then spent decades occupying increasingly responsible management positions across the coal, utility, alternative/renewable, and, most recently, transportation electrification industries.
I have worked on major environmental and energy initiatives, led the development and financing of major energy projects, and managed the acquisition and sale of energy assets. Throughout this sojourn, I have focused on integrating public policy, technology, and commercial realities to create actionable investment strategies. I am politically independent, having sought senior energy policy roles in both Republican as well as Democratic administrations. As a result, I come to the climate debate as a seasoned industry practitioner who can “connect the dots” and tell the difference between the art of the possible and a step too far.
After four years of climate change denials, there is now an occupant in the White House who recognizes the scientific consensus that the planet is warming and that a growing contributor to warming is anthropogenic carbon emissions. No doubt that such recognition is a positive step toward addressing climate change.
Unfortunately, rather than following the science and coming forth with a balanced program to guide the transition to a clean energy economy, the administration appears to be adopting the ideology of carbon that has been the hallmark of many in the environmental advocacy community. According to these adherents, the “sky is falling,” with climate change constituting an existential threat to the continuance of life on earth. Therefore, draconian measures must immediately be taken in the United States to achieve net-zero emissions as quickly as possible, irrespective of the economic dislocations and impacts.
Many of these folks now argue that the transition will actually create jobs and overall employment and result in significant gross domestic product growth and that “everyone” will gain while they act to eliminate the fossil fuel industry with some 10 million U.S. jobs. As the saying goes, if it’s too good to be true, it probably isn’t. These climate doomsters and their climate denier counterparts represent the politically polarized bookends that appear to have developed around virtually every issue over the past four years and which have created gridlock in Washington, including around climate change.
For years now, we have seen climate reports, issued by organizations such as the United Nations Framework Convention on Climate Change, which have concluded that anthropogenic carbon emissions are driving climate change with its attendant impacts, e.g., sea level rise and episodic severe weather events.
However, I and others have concluded that given the pervasive economic impact of the legacy energy industry upon the economies of the industrialized world, it was simply infeasible to attempt to eliminate fossil fuels on a time schedule to avoid blowing through the 1.5 degree Celsius inflection point for global temperature rise that has become the consensus metric for climate change impact.
More importantly, a concerted effort to do so would cause sufficient political backlash as to make real progress on climate change extremely difficult, as has largely been the case for the last decade. Now, also we have the respected work of professor Steven Koonin, who shows that while available climate data confirms that the planet is warming, this warming appears to be part of a global cyclic trend, with anthropogenic carbon emissions making a contribution, but not necessarily a dominating one, at least up to the present. Further, it appears that overall, compared to other periods, there may not be a significant increase in severe weather, sea level rise, widespread fires, droughts, and floods.
Whether one has the view that the climate is changing but the cost of draconian emissions reductions is too great a price to pay, or there is too much uncertainty with respect to the role of anthropogenic emissions, it would be foolhardy to argue that we should not do anything material to address climate change; at this juncture, having no plan should be roundly rejected. So, what is needed is a climate action plan that is deliberate, thoughtful, and structured in a way that provides actionable results, spreads the obligation for emission reductions fairly, and minimizes economic dislocations.
Increasingly many, including President Joe Biden, acknowledge that arresting the growth in anthropogenic carbon emissions can only be achieved through a concerted and coordinated global initiative with China and India participating as true partners. However, the climate doomsters, in their zeal, are prepared to skip the Chinese and Indian commitments, under the naive belief that either China and India will be embarrassed into action after the industrialized world flays itself with net-zero policies. As U.S. carbon emissions only represent some 15% of global emissions, unilateral emissions reductions will have only modest global impact, particularly if these countries and others exploit the attendant economic dislocations to gain competitive market advantages.
What does this all mean for a judicious, thoughtful, and actionable U.S. climate policy?
First, there needs to be a comprehensive domestic policy, not a series of one-off incentives with no market feedback mechanism or policies built around unactionable and arbitrary emission reduction targets, disconnected with the science.
Second, the policy needs to be multidimensional to include a market-based construct for reducing U.S. emissions over time, including explicit acceptance of decarbonized fossil fuels; requiring enforceable and comparable emissions reductions or caps from China and India; attacking global deforestation through a “carrot and stick” approach; supporting broad adoption of clean energy in the developing world; enhancing resiliency of civil, telecommunications, and other infrastructure in the U.S. and across the developing world; and assisting developing countries to adapt to a warmer planet. Even if climate change was not occurring, all these initiatives would fall into the basket of “good things” to do.
The truth is that funding these initiatives will be costly. We need to be thoughtful in developing the framework for policy action and in the funding mechanism. On the funding front, it appears that the Biden administration believes that we can “appropriate” ourselves to a clean energy economy, i.e., the federal government can, with virtually no limitation, fund the transition with grants and tax incentives, the latter of which apparently are free or almost free.
Even if the federal government had access to virtually infinite sources of capital, relying upon federal programs to drive the transition would cause significant market dislocations, result in stranded and ineffective investments, and even slow the transition by creating bureaucratic inertia that could be avoided through reliance upon market mechanisms and private investment, where there is enormous capital liquidity seeking investment opportunities.
While many climate activists appear to distrust the market in favor of governmental intervention, the market is the most effective tool we have to affect economic transitions, and we need to rely upon the private sector and, specifically, private capital to drive decarbonization in a deliberate and effective manner.
Hopefully, from the ashes of our internecine political combat will arise a middle-of-the-road, balanced movement composed of both Republicans and Democrats seeking responsible policies to address not only climate change but other critical issues that have festered without solution for a decade or more.
Michael Schwartz is CEO of New Wave Energy Capital Partners, a strategic advisory firm supporting the energy industry, and is a former visiting professor in energy and environmental studies at Princeton University.
