Energy production has become the geopolitical, economic, and cultural battleground of our time.
Energy makes the modern world possible. Everything we do and produce involves energy: food, transportation, vehicles, buildings, shipping, electronics, you name it. Producing energy abundantly, efficiently, and cheaply improves people’s well-being. It also makes countries more resilient to natural disasters and bestows distinct military advantages.
Unfortunately, while pro-energy policy should be uncontroversial, it has become a highly contested issue. Foreign governments and international agencies who do not have the best interests of the United States at heart have mobilized a global crusade against greenhouse gas emissions in the name of “saving the planet.” They use every resource at their disposal to weaponize Intergovernmental Panel on Climate Change forecasts and they play on the insecurities and ignorance of ordinary activists to handicap energy development.
The campaign against greenhouse gas emissions creates significant and costly unintended consequences: higher prices, slower economic growth, fragility, risk, and other environmental harm.
Take Europe, for example. Economic growth in Europe basically died a decade ago. Their energy prices have risen 35% in real terms over the last decade while their economies have grown about 11%. Energy costs and heavy regulation in Europe have allowed China to increase its market share in one of Europe’s biggest industries: automobiles. Europe’s agricultural sector is also in a tailspin, largely because of environmental regulations to use less fertilizer, less fuel, more expensive energy, and reduce livestock — policies that have resulted in widespread protests.
Government regulations, requirements, and mandates to use renewable energy are wasteful and inefficient. They transfer billions of dollars to unproven companies and industries. They favor certain technological innovations over others. And, most importantly, they almost entirely neglect the economic costs they create and impose on everyone.
We do not know what the best and most effective ways of producing, storing, and transporting energy will be in the future. That’s why we need clear, simple rules, free markets, and entrepreneurial initiative. The current approach of most government officials is just the opposite.
The U.S. can pursue abundant energy while reducing greenhouse gas emissions more effectively through decentralized entrepreneurship and innovation rather than top-down government planning.
Nuclear power should be put back on the table. It has been strangled by red tape and regulatory hostility, but it can generate massive amounts of energy with a very limited carbon footprint.
Technologies to reduce greenhouse gas emissions from fossil fuels have made great advances over the past half-century. Allowing individual companies to decide what to build, what technology to use, and how to invest will lead to the most economic growth and some reduction in greenhouse gases without impoverishing us.
Public officials should not put their fingers on the scale when it comes to developing energy technology. When they do, companies devote more resources to influencing politicians and regulators and fewer resources to product development. They also fuel unsustainable activity.
Free market innovation is especially vital now. Our electric grids are being taxed past their limits as we “electrify” heavy industry, and the massive ramping up of electric vehicle output has outpaced the production of minerals used to make batteries.
Nor is the U.S. ready for a flood of electric vehicles. Whether it is updating parking garages to support the additional weight of EVs, building a new electric charging grid across the country, developing EV maintenance and repair abilities, or managing the risks of exploding battery failure, much more market development needs to take place before EVs can meaningfully replace traditional vehicles.
Here’s a better approach than pouring billions of taxpayer dollars into EV and battery development: cut back on subsidies and distortions in all energy production — fossil fuels and renewables — and create broad-based, clear pricing structures around greenhouse gas emissions.
Let entrepreneurs and companies explore and compete on the best ways to generate, store, and use energy. Let them experiment widely on technological innovation without unnecessary red tape and distortions. State and national legislatures, government regulators, and the United Nations should get out of the way.
Public sentiment and economic rewards for improved efficiency provide plenty of incentive for the private sector to adopt lower emissions technology over time. And they can do this while delivering prosperity and high standards of living. Government policies, however, cannot.
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Paul Mueller is a senior research fellow at the American Institute for Economic Research.
