The False Promise of Green Energy (new Cato book packs a punch)
By administrator -- February 25, 2011By Andrew P. Morriss, William T. Bogart, Roger E. Meiners, Andrew D. Dorchak
“This new work [289 pages] offers an outstanding, nearly unprecedented evaluation of claims by green energy and green jobs proponents that we can improve the economy and the environment, almost risk free, by spending billions of dollars on what are ultimately false promises.”
Energy affects everything we do. The late Julian Simon coined the term “the master resource” to describe energy’s crucial role in our economy. Nearly half of energy we use is used indirectly in the production of food, medicines, and consumer goods.
This is important because anything that increases the price of energy will also increase the prices of goods that use energy indirectly. Thus, if energy costs were to increase because of forced use of more expensive renewable energy, not only would the price of electricity rise, but so would the price of food, medicines, and consumer goods, such as cotton t-shirts. Those price increases would disproportionately affect the poorest.
The False Promise of Green Energy looks at the realities of energy production and use in the United States and the rest of the world versus the promises of green jobs’ advocates. The data in our book strongly suggests that green-job proponents have been peddling an unrealistic vision of energy production and use and are suggesting measures that will require either dramatically increasing the cost of energy or significantly cutting its use.
Either and both would reduce living standards. The impacts globally would be even worse, as increasing energy use generally, and increasing use of electricity in particular, is an important way to improve the quality of life for people in developing economies.
Picking Losers
The best way to encourage development of new technologies is not for the government to select some favored ones and subsidize them. Governments love to do this, because it allows politicians to hand out money to special interests.
Remember the Synfuels Corporation? Congress and President Jimmy Carter wanted to spend $100 billion (which a sum back then!) to synthetically produce liquid fuels from coal to replace oil. The project was unsuccessful, and President Ronald Reagan pulled the plug shortly after taking office.
Instead of letting Congress choose the next technology, we should leave that to market competition. When governments choose technologies, they often fail for three reasons.
First, government decision makers are insulated from market signals. Without having to respond to price changes, decision makers can’t learn the important lessons about how they work.
Second, the public resources governments make available are so addictive that firms reorient themselves away from producing to meet market demand toward pleasing the government decision makers who allocate funds. Every dollar spent on campaign contributions is unproductive of energy. But because those dollars yield reliable results of more subsidies and special treatment, while money invested in technology is risky, firms rationally invest in lobbying instead of R&D.
Third, government decision makers own only those successes (and failures) that happen between now and the next election. Worrying about the economics of solar power in 2030 is well past the time horizon of anyone in government today. No one in office now is likely to be held responsible for their decisions today 15 years from now when the results are in and the bill comes due.
Markets, on the other hand, price in the future. If a company is making a big bet on solar technology, its stock price will reflect that. If solar seems like a good bet, the stock price will rise. If not, it will fall. Today’s executives can be held accountable for that decision.
Wasted Money, Bad Energy
The costs of the green energy programs proposed by the interest groups described in The False Promise of Green Energy are staggering. The federal government committed $62 billion in direct spending and $20 billion in tax incentives to green jobs programs as part of the 2009 stimulus bill. And keep in mind that this money is all borrowed and must be repaid with interest.
Worse, the price tag is open ended. Even the proponents are reluctant to give firm cost estimates since one can, of course, add or subtract pieces of a program that can encompass many things. For example, the premier report from the United Nations that endorses massive moves to “green energy” as we abandon coal, natural gas, oil, and nuclear energy admits: “No one knows how much a full-fledged green transition will cost, but needed investment will likely be in the hundreds of billions, and possibly trillions, of dollars. It is still not clear at this point where such high volumes of investment capital will come from, or how it can be generated in a relatively short period of time.”
The scale of social and economic change that could be imposed is immense. To take just one example, the worldwide production of cement in 2007 was 2.77 billion metric tons. Cement is ubiquitous in modern society. Yet, as the UN report admits, the “cement industry will only become sustainable if the building industry finds completely new ways to create and use cement or eventually figures out how to replace it altogether.”
Green energy advocates propose equally dramatic shifts in energy production technologies, building practices, and transportation. These calls for dramatic changes in every aspect of modern life are wrapped in a bright, shiny package in the green jobs literature, promising not only a revolution in our relationship with the environment but to employ millions in high paying, satisfying jobs. Despite the new green packaging, these calls for creating a new society through central planning are as old as human history.
The failure of the twentieth century’s utopian experiments suggests caution in undertaking such widespread transformations of society. The master resource requires a free market path, not a road to serfdom.
United Nations Environment Programme, Green Jobs: Towards Decent Work in a Sustainable, Low-Carbon World at306 (2008)
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Andrew P. Morriss is the D. Paul Jones Jr. and Charlene Jones Chairholder in Law and a professor of business at the University of Alabama.
William T. Bogart is president of Maryville College and previously served as a member of the economics faculty at Case Western Reserve University.
Roger E. Meiners is the Goolsby Distinguished Professor of Economics and Law at the University of Texas at Arlington.
Andrew D. Dorchak is head of reference at the Case Western University School of Law’s Judge Ben C. Green Law Library.
Let’s call the government-sponsored green energy programs for what they truly are: central planning.
We all know how well central planning works, don’t we?
I’ll look forward to reading the book. There is a single review of it now on Amazon, which I recommend: http://www.amazon.com/False-Promise-Green-Energy/dp/1935308416.
http://www.amazon.com/False-Promise-Green-Energy/dp/1935308416.
This kind of “green” flummery, since it provides no functional capacity to a system that requires functional capacity, is essentially “additive,” not alternative, energy. Which means, among many other things, that it must make any power converted from such energy sources much more expensive. Which means that energy production will become much less affordable.
Since the best of modernity rests upon a foundation of reliable, secure, highly affordable power supply, and since green initiatives like wind and solar work to fracture this foundation at every level of consideration–economic, environmental, social–this politically mandated turn toward the worst features of Banana Republics should be spurned for the enormous waste it is.
Good for Cato.
While Libertarians should be credited with seeing the flaws of renewable energy, they are on the wrong track as far as further reliance on fossil fuel is concerned. It would be far more helpful if libertarians were to work out free market approaches to the implementation of a large scale nuclear deployment. That is not going to happen because the Libertarian movement is enthralled by Fossil Fuel plutocrats, who use their money to pull the strings on the libertarian movement.
Charles, before going ad hominem, you should inquire whether there are bona fide libertarian reasons for not jumping on the nuclear bandwagon. Check out Cato scholar Jerry Taylor’s “Atomic Dreams” on this site.
Then take a look at Doug Koplow’s report for the Union of Concerned Scientists, “Nuclear Power: Still not Viable without Subsidies.”
Surely, you don’t suppose USC is “enthralled by Fossil Fuel plutocrats.” Koplow is not a libertarian, but his argument is essentially the same as Taylor’s: Nuclear power wouldn’t exist without political props, and subsidies distort resource allocation.
A society can’t create energy by placing a large amount of the costs for that energy creation on our federal deficit. If the actual costs of green energy were billed to the consumers, they would know the truth of the costs and revolt. So our Federal and State Governments subsidize those costs. All of that money doesn’t come from taxpayers but is placed on our federal deficit. We intend to pay later for the energy we use know. What this means is that we are leaving it up to our children for the energy WE use know. We are not responsible to pay for our current energy use, so we will let them deal with the consequences. Both Dems and Reps agree that the federal deficit is dangerous and weakening to our economy and our way of life. Sadly, even the majority of those who are smart enough to be AGW skeptics, are “for” alternative green energy. They don’t comprehend the trickery and chicanery that goes into this sale, nor do they understand the basic economics of use now, pay later.
Why have these evil forces grown so strong in our general society. It is George W Bush’s fault. The country knows that he deceived them in promoting the necessity of the Iraq War.
http://georgewbush-whitehouse.archives.gov/news/releases/2002/10/20021007-8.html
This was another act now, pay later action, resulting in tens of thousands of dollars of fedeal gov’t debt for each US citizen. The result was district of the Right, causing the middle to snap from Right to Left, thereby making it much, much easier for a power grab to take place. Our descendants will pay that price in ways that we can’t comprehend or predict now.
One more point. The absurdity of electric cars. So far, I haven’t owned a laptop where the battery can work for more than 45 minutes after 6 months. Laptops don’t even have any moving parts, yet I am led to believe that an electric car battery is going to be viable for a few years! Also, I haven’t seen an electric car on the road since last summer, yet somehow our Gov’t and the green agenda has made this their big push for the futre?? Pushing something that obviously no one wants?? Life has become so absurd on so many levels.
“That is not going to happen because the Libertarian movement is enthralled by Fossil Fuel plutocrats, who use their money to pull the strings on the libertarian movement.”–Charles Barton
In thrall to fossil fuel plutocrats indeed, Charles. Thank for this terrific phrase. A nice complement to the “corporate kleptocracy” now ravishing the land. I don’t know about how refined the puppetry has become vis a vis libertarians and free marketeers, except to say the airways of the energy marketplace, despite all the hoopla about deregulation, are struggling to draw a breath, closed off and constricted by the strong arm of captured government.
To expect that government will not be involved in energy policy is about as naive as believing, as Karl Marx would say, that the government will “wither away”. This is akin to believing Big Oil and Agriculture don’t have a huge say in the energy policies of this country. Ayn Rand was right about the negative impact of government, however she missed a crucial fact. Hank Rearden would have spent a great deal more money and paid much more attention to his lobbying effort!
First, government decision makers are insulated from market signals? Believe me, if gas hits $5 a gallon this summer they will in no way be insulated. Witness the upheaval in the middle east, largely due to increasing food costs.
Second, any industry that does not spread its money around Washington will meet Hank Reardon’s fate.
Third, markets consistent of players in the market. They are mostly concerned with beating the number on a quarterly basis – hardly a long-term view.
In summary, the idea that the market is the answer to all things is as enlightened as the idea that government is the answer to all things. Together they will continue to work hand-in-hand and bring us future events comparable to the first moon landing and the crash of 2008. For, if not to influence government, what is the purpose of the Cato Institute or the Center for American Progress.
In the final analysis we have built a society, a world structure, dependent upon technology and relatively cheap energy. What we need is an accurate accounting of oil reserves (good luck) and prudent investment in alternatives that are currently not economically viable. Leave it all to the market? Leave it all to government? We have already decided upon whom we are ultimately relying – science and the technologists. Meanwhile we can all have fun pushing our view to the masses, and to the government, through our favorite lobbying group.
Jan, I call them the way I see them. The name of a certain very wealthy man gets mentioned a lot on Master Resources, and we hear quite a lot about renewables and fossil fuels on MR, but not about nuclear energy. And of course, AGW is considered a very bad idea here The program is burn the gas, coal and oil as fast as you can, and maybe some day the Koch great grandchildren will be living in wealth and luxury on Baffin Island.
“the airways of the energy marketplace, despite all the hoopla about deregulation, are struggling to draw a breath, closed off and constricted by the strong arm of captured government.” The problems of the conventional energy industry are child’s play compared to the problems of the the nuclear power industry, with the NRC the left wing anti-nukes and the the unidentified money sources who are shelling out tens of millions of dollars every year for anti-nuclear campaigns and anti-nuclear propaganda. Any idea where all that money comes from Jon?
Charles–and Richard:
As I’ve mentioned many times before on MR, both in articles and comments, if one is concerned about enhancing the power needs of the future in ways that minimize the human footprint on the earth and maintain the planet’s species diversity, one should be pressing hard for nuclear facilities here and abroad. And if one believes the earth will turn hellishly warm because of a surfeit of human-produced carbon dioxide, then one should be working night and day for the redemption offered by incomparable nuclear power.
In too many ways, however, nuclear has been its own worst enemy. It’s PR campaign leaves so much to be desired. Take a look at Areva’s website, for example. Consider at the way it supports investment in nutcase energy operation like wind, giving (influential) people the idea that wind can work as well as nuclear–without having a plant meltdown to–uh–China. What could be dumber than a wind/nuclear tandem as a provider of modern power? But I’m sure Areva enjoys wind’s multifaceted ability to create tax tax sheltering for the corporation.
Nuclear must get much more serious in its sales pitch, not allowing temporary monetary gains to subvert its main objectives.
The solution to the energy question. First, it is known who controls the world money system, the world oil multinationals, ( the world still thinks oil is a fossil fuel…lol), the military industrial complex, media, medicine, science dogma like the IPCC, need I go on? These elite at their very core are in turn controlled by the spiritual dimension of the fallen. Lets get that down first shall we ! Put simply, evil controls the world. That will seperate the men from the whimps…peroid. Those still reading can move on to the truth now. To cut the head of the dragon is the place to begin…. this is done by a relationship of the heart with the most high… God ! Anyone with the holy spirit within will humble themselves and put opinions aside to agree with eachother, without division. Now we have the players who can do the job of solving the energy question. Begining with the philosophers who are of one mind and one heart, you know they will remove evil from their power. You dismantle the financial system, isolate the entire derrivitives theft attempt, open the entire military industrial complex and release to the public the entire list of all technologies sequestered from the world, to manufacture and distribute all products and services now in use by these banksters. Capitalization requires no usery…period. Civilization cannot save itself, nor was it ever designed to . Those who think we can, are those already in power. By extension naturally this means all formal religions which are a detriment to that presious relationship, are also removed from power. This means simply the entire new world disorder is either dead or in prison, or out on good behaviour, with their power removed. From this point, there are hundreds of plans written out as to how to straighten out the rest of the challanges, except with a change of heart, it would all radically change for the better with a lot less upset. Bottom line…the solution will take the second coming. Until then, occupy that there is life in the world and give no quarter to evil in all it’s dark places. As for empire building? Just a castle in the sand.
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