The production of oil and natural gas, because they are carbon fuels, should be halted. At least thats 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 nations electricity in 2016. In October, the Bureau of Labor Statistics predicted that the oil and gas industry would drive job growthin 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 Americanespecially 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, well 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 nations 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; its not renewable energy thats taking its place, but natural gas. Renewable energys secret is its need for natural gas as a backup. While technology is constantly improving, people managing the grid cant 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.
Theres 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 gasand, in the case of gas, has led to an abundance of low-cost fuel thats 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. Its 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 lions 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 wont 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 buggyreplaced 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 Energys Section 1703 loan program, for example, predominantly went to major energy companies. That shouldnt 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 trillionsof 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 is Research Director and Senior Fellow at the Independent Institute, J. Fish Smith Professor in Public Choice in the Jon M. Huntsman School of Business at Utah State University, Editor-in-Chief of Public Choice, and editor of the Independent Institute book, Taxing Choice: The Predatory Politics of Fiscal Discrimination.|
|Josh T. Smith is a master's student at Utah State University majoring in economics and political science. He works as a Policy Analyst at Strata, a policy research center in Logan, Utah.|
So-called sin taxesthe taxing of certain products, like alcohol and tobacco, that are deemed to be politically incorrecthave long been a favorite way for politicians to fund programs benefiting special interest groups. But this concept has been applied to such sinful products as soft drinks, margarine, telephone calls, airline tickets, and even fishing gear. What is the true record of this selective, often punitive, approach to taxation?