Energy Policy

A key plank of Obama’s campaign was a theme that we need to “reduce our dependence on foreign oil.”  This was really more of a populist crowd-puller, and I assumed that it would kind of go away once oil prices came back to Earth.  Instead, this call to action is informing tens of billions of dollars in spending on a variety of renewable energy projects.  

Thing is, this really makes no sense.  Foreign oil is bad because it pulls us into Iraq-like conflicts?  That only tells you that invading Iraq was a bad idea–every other country on Earth manages to survive on imported oil just fine.  In fact, every other nation is also dependent on others for some sort of energy, even Saudi Arabia.  Energy autarky is a dangerously misguided notion.  

But maybe it’s bad because of the whole carbon thing, and we should also get rid of coal energy as we go along.  If that’s the problem, then put in a carbon tax–as Norway did, with amazing results–so we properly price carbon and use less of it.  While some sort of cap-and-trade may be in the works, the dominant tactic for achieving this goal seems to lie in massive subsidies for researching ‘green’ technologies.  

Of course, nuclear energy–one of the cleanest and cheapest technologies around, one that America is perfectly willing to export to the rest of the world–doesn’t count, because the Senate Majority Leader is from Nevada, where the waste would go.  Hydro power doesn’t count either.  Natural gas exists in abundance in this country and can be cheaply imported in liquid form.  Many countries are switching over to gas for their cars and buses because it’s cheaper and pollutes far less.  Yet Obama’s budget punishes natural gas drillers.  For some reason, our technocrats have determined that our economy needs to shift to an entirely different mode of power because, well, windmills look awesome and take away our guilt.  A lesser person than I, one far more cynical, would think that green-boosters are more interested in manufacturing a crisis to meet a pre-existing agenda rather than finding the most cost-effective solution to a well-defined problem.  

The economics aren’t quite there either.  Wind and solar consume massive quantities of land far from major population centers and are terribly unreliable and unprofitable.  Government subsidies may speed the process of discovering cheaper forms of these technologies, but the billions of government dollars spent so far on these technologies have come up with essentially nothing.  Private players are, however, rapidly spending on improving these technologies.  Rather than spend billions in subsidies, pricing carbon would allow utilities to make the best long-term economic decisions on the mix of energy they want to produce.  

And the millions of green jobs these programs are going to generate?  Models suggest that the net job impact of switching to renewable energy would be negative.  The key issue here is that every kilowatt we get from wind means an equivalent loss from some traditional job-generating sector of the economy.  

The last bit to take on is the social nationalism portion of the agenda; the idea that America is “falling behind” other countries in our production and consumption of green goodies.  As far as consumption goes, of course: Make something cheaper, and you get more of it.  That’s no reason for America to adopt a technology before it becomes economically feasible.  And as far as production goes, China remains a major supplier of solar cells, despite the fact that little is installed domestically.  Production will go wherever costs are cheapest; that hasn’t degraded America’s massive comparative advantage in high-skill manufacturing, services, and marketing.  More fundamentally, you should never do something just because everyone else is doing it.  It didn’t work in elementary school, and it shouldn’t be an argument fit for national discourse.  

Mitch Daniels supports technology to turn polluting coal into clean natural gas for power generation.  His plan leverages our large deposits of coal, while keeping pollution to a minimum.  And he doesn’t require a subsidy; his ideas are profitable.

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