Net Zero, Joe Manchin, and High Energy Prices

This morning National Review published my article expressing skepticism that the advance of “net-zero” climate policy is inevitable (or even likely). It was written before the announcement this week that Sen. Joe Manchin (D-WV) had come to an agreement with Senate Majority Leader Chuck Schumer (D-NY) to support expanded renewable energy subsidies, among other proposals, as part of the Inflation Reduction Act. Doesn’t this dramatic new development, some might ask, disprove my theory?

My argument in the NR piece is that:

1. Net-zero policies are costly, impacting both affordability and reliability of energy supplies;
2. Voters are price-sensitive when it comes to energy, so increasing prices will be unpopular; and
3. Radical decarbonization will only be politically tenable when its long-term costs are hidden.

Nothing in the developing coverage of the Inflation Reduction Act (IRA) contradicts that.

Relevant to the claims from the Senate majority that the IRA will “lower energy costs,” there is a big difference between allowing the development of energy supplies that are actually affordable and extracting wealth from the economy via taxation and redeploying it to subsidize politically favored industries. That is a wealth-destroying, unsustainable attempt at robbing Peter to pay Paul that will lead to higher actual energy costs going forward. Attempting to paper over this deficit with ever more subsidies will eventually collapse.

The massive subsidy levels envisioned by the IRA also make no sense in the context of claims by supporters of wind and solar development. The World Economic Forum declared in 2021 that “Renewables were the world’s cheapest source of energy in 2020.” A 2021 story in Popular Science claimed that the assumption about renewables being more expensive “has actually been obliterated by a recent decline in solar and wind costs.” This is common rhetoric from net-zero supporters. Yet even the very pro-renewable Popular Science article concedes that the industry is dependent on government support: “Congress will pass subsidies leading to a boom in wind industry growth, but then later allow those subsidies to expire—leading to bankruptcies.”

So, is wind (and solar) power already cheaper than oil and natural gas, or is it in such a tenuous market position that it will immediately collapse without taxpayer support? It’s hard to see how both of those things could be true simultaneously. Promising technologies, after all, don’t have to be immediately revenue-positive to attract investor support. Many of the biggest stock market darlings burn money on long-term investments for many years before becoming profitable. If the future market prospects for wind and solar dominating the energy industry were half as promising as their proponents claim, subsidies from federal and state taxpayers should be entirely unnecessary.

My NR article quoted Ted Nordhaus of the Breakthrough Institute, and it’s worth highlighting his recent Foreign Policy essay again here:

Climate advocates and their political allies have often engaged in the policy equivalent of smoking one’s own supply: They have confused the subsidy-driven growth of renewable energy with evidence that the world is ready to rapidly transition off fossil fuels. Hence, they discouraged the production of oil and gas wherever they could and chronically underinvested in other sources of clean energy, such as nuclear power. But while there has been technological progress, the global economy is still very far away from fully replacing fossil fuels.

You can (as they used to say on The Wire) juke the stats on renewables if you pump enough multi-billion dollar taxpayer subsidies into the system. But that doesn’t change the chemistry and physics underlying the advantages of fossil fuels, which still have renewables beat on affordability, energy density, reliability, and dispatchability. This is not to say that further research could not generate impressive new advances in the science of energy production, but it does mean that as far as most advocates have presented their case thus far, the “new energy economy” is an exercise in magical thinking.

Not only are we unlikely to go to net-zero by 2030 (or 2035 or 2050), a future of increased global prosperity will almost certainly involve more fossil fuel consumption. To understand while that will need to be the case, ready my review of Alex Epstein’s recent book Fossil Future. You can also watch the Competitive Enterprise Institute book forum on Fossil Future from June here.