If You Want To Keep Fossil Fuels In The Ground, You Support A Form Of Economic Self-Destruction
The production of oil and natural gas, because they are carbon fuels, should be halted. At least that’s the argument heard loudly these days from those whose rallying cry is “keep-it-in-the-ground.” But these are extreme arguments that are proof of the saying that good politics rarely makes good policy. Fossil fuels still play an important role in meeting energy needs – and will for years to come.
A striking element of the keep-it-in-the-ground campaign is what its proponents rarely discuss: fossil fuels remain indispensable to the American (and global) economy. Oil, gas, and coal supplied more than 60 percent of the nation’s electricity in 2016. In October, the Bureau of Labor Statistics predicted that the oil and gas industry would drive job growth in the upcoming years. Cutting off access to the very resources that power the economy not only will raise energy costs, but cause substantial unemployment and lower the quality of life for every American — especially the poor and middle class, who can least afford to pay higher energy bills. Plastics, medications and everything we use requires energy to produce and distribute; if energy costs more, so will everything else.
This fact about our reliance on fossil fuels is overlooked too often. Unless we are really willing to accept drastic drops in our living standards, we’ll need fossil fuels. The truth is that no magic wand is at hand for reducing carbon dioxide emissions dramatically. The keep-it-in-the-ground campaign is eager to talk about how to set things right by relying more heavily on renewables, but two of the most popular forms of renewable energy, solar and wind, supplied only about 7 percent of the nation’s electricity in 2016. By contrast, coal provided 30 percent.
Energy Information Administration data show that coal has been disappearing from our energy supply over the past eight or nine years; it’s not renewable energy that’s taking its place, but natural gas. Renewable energy’s secret is its need for natural gas as a backup. While technology is constantly improving, people managing the grid can’t always rely on windmills and solar panels to meet baseload power demands, so natural gas largely has kept the lights on. In fact, a working paper released by the National Bureau of Economic Research found an almost one-to-one correspondence between natural gas and renewable energy. The research clearly suggests that if you kept energy resources in the ground, renewables could not yet reliably power our lights, let alone the economy.
There’s a more sensible alternative to abandoning oil and gas. Technological advances are leading to greater efficiencies in the production, processing and use of oil and gas. More fuel-efficient gasoline engines are making a huge difference. And the shale revolution has reduced the cost of producing oil and gas — and, in the case of gas, has led to an abundance of low-cost fuel that’s replacing coal for electricity generation.
In fact, economic growth and carbon emissions have finally been decoupled thanks to fracking. Largely because natural gas is cleaner than coal, U.S. carbon emissions are continuing to decline – as they have been for nearly a decade. It’s important to note that fracking is responsible for much of that decline, as a research brief by the centrist think-tank Brookings points out. Government action may have played a role, but the lion’s share of the reduction in carbon emissions is because of fracking.
The bitter irony is that the keep-it-in-the-ground policy is, in fact, a form of economic self-destruction. But that won’t be forever. Renewable energy technologies, after a long incubation period, reportedly will be cost-competitive with fossil fuels by 2020. Although skepticism is warranted because similar claims have been made since at least the 1980s, it should also be exciting. Eventually, fossil fuels will go the way of the horse and buggy – replaced by something better. So, the real question is how best to get there.
Centralized efforts by government entities largely have delivered political favors rather than pushing the boundaries of scientific knowledge outward. Government R&D funding too often ends benefiting big corporations instead of offering a leg up for the little inventor. The Department of Energy’s Section 1703 loan program, for example, predominantly went to major energy companies. That shouldn’t be surprising since those companies are effective lobbyists for taxpayers’ money.
It likewise should be no surprise that the global fossil fuel industry also receives trillions of dollars in subsidies.
The evidence is overwhelming that keeping fossil fuels in the ground would hamstring the American economy. At the same time, increasing competition between energy producers will help keep costs down and push the innovation frontier in ways that lead to new cleaner and more cost-effective energy technologies. Just as in the case of fracking, however, that will happen only if free and competitive market forces – not bureaucratic regulations or well-funded interest groups – guide U.S. energy choices. Instead of having politicians choosing winners and losers in energy markets, a greener future coupled with ‘Energy Dominance’ is more likely if we let the market speak by removing subsidies and governmental support for all energy sources.
William F. Shughart II, research director of the Independent Institute, is J. Fish Smith Professor in Public Choice at Utah State University’s Huntsman School of Business.
Josh T. Smith is a research manager at the Center for Growth and Opportunity at Utah State University and a master’s student studying economics.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.