Forbes


The Joe Biden presidential campaign has released a new proposal for energy and environmental policy, including plans to spend $2 trillion over a decade and a goal of achieving 100% clean electricity standard by 2035. Also promised: good union jobs, a jolt of new life to the economy, and for all children to be above average. (Stole that last from “Lake Woebegone Days”.) Without knowing the details yet, there are a lot of cautionary remarks that need to be made, not just about this plan, but about politically motivated energy policy in general.

Biden’s $2 trillion New Green Deal underscores the need to separate Energy Policy from politics- oil and gas 360

Source: Forbes

First, I have to admit my attitude towards energy politics tends to be closer to ‘a pox on both their houses’ rather than embracing either side in the debate. In part, this reflects my belief that there shouldn’t be ‘sides’ to the debate, that is, policies driven by partisan or ideological views as opposed to cost-benefit analysis. And the public debate tends to be driven by clichés and superficial concepts rather than serious discussion of the challenges and optimal responses. (Shocking, I know.) Democrat usually address energy demand, Republicans energy supply, and few think about costs and/or benefits in any systematic way.

For example, Democrats will tell you that spending money to create jobs is great policy, but if you suggest government support for nuclear power on the justification that millions of guards would need to be employed, according to Ralph Nader said in the 1970s, you will cause eyes to roll all over Washington.

The biggest problem is that most energy policies are not designed by experts, but by politicians who respond to a mix of ideology and special interests. Republicans want free markets and support for corporations, Democrats want regulation and union jobs. (Yes, that is a gross simplification, but with large grains of truth.)

There is an excellent example of how to go wrong with a major program of energy transition — the German Energiewende. To quote a recent article in Der Spiegel, “Germany’s Federal Court of Auditors is even more forthright about the failures. The shift to renewables, the federal auditors say, has cost at least 160 billion euros in the last five years. Meanwhile, the expenditures ‘are in extreme disproportion to the results,’ Federal Court of Auditors President Kay Scheller said last fall…”

That amount is roughly half what Biden is proposing to spend (annualized), and the result has not only been disappointing but not significantly better than what the U.S. accomplished since 2011, as the figure below shows. Of course, the policy devil is in the details: the U.S. has huge cheap natural gas resources which made switching from coal to gas for power generation economically attractive, Germany has to pay much more for gas imports. Germany decided to phase out nuclear power after the Fukushima incident, and replaced it with lignite (for now), the U.S. has retained most of its nuclear power.

And there is increasing public scrutiny over a) the cost of ‘clean’ energy, and b) the side effects, particularly the massive land usage that renewables require. I’ve long argued that federal subsidies for electric vehicle purchases represent money for the well-to-do to buy expensive toys, and while electric vehicle technology is much improved in recent years, it is still one of the most expensive ways to reduce greenhouse gas emissions. The actual costs vary according to the source of the electricity, but most estimates of greenhouse gas abatement costs don’t even include Battery Electric Vehicles, as they would be off the chart.

When Donald Trump was elected, I argued against a knee-jerk rejection of existing regulation, but a careful appraisal of existing regulations and revising them to achieve similar goals with less cost. Hopefully, a President Biden would not simply undo every Trump Administration initiative in a knee-jerk response to his predecessor’s approach, but rely on sophisticated, in-depth analysis of costs and benefits.

Many wail that the U.S. has no energy policy, but I think the first step was similar to that of Ronald Reagan, which I would characterize as “First, do no harm.” (Stolen from the health care profession.) Past energy policies have included the Carter Synfuels Program, the Clinton Administration’s Partner for a New Generation Vehicle program (supporting a diesel-electric hybrid), or the Obama Administration’s Recovery Act which included by their estimate was “…the largest single investment in clean energy in history, providing more than $90 billion in strategic clean energy investments and tax incentives to promote job creation and the deployment of low-carbon technologies, and leveraging approximately $150 billion in private and other non-federal capital for clean energy investments.”

As the figure below shows, none of these seems to have made much of an impact on U.S. energy consumption, although admittedly it is an eagle-eye view.

Presumably this piece will generate a huge amount of “what-about-isms” in response and I certainly would not suggest that such a general view should guide energy policy in any precise way. Rather, the policy needs more careful consideration than sound-bites, clichés, and aphorisms, but rather detailed cost-benefit analysis if it is to avoid the kind of waste that occurred in the German Energiewende program or the Carter Synthetic Fuels Corporation.


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