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Fossil Fuels Are the Future

A climate agenda for the president.

Sep 15, 2014, Vol. 20, No. 01 • By IRWIN M. STELZER
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The president is not only engaged in a futile exercise when he tries to bend the arc of history to produce a world free of fossil fuels. He is on the wrong side of history, too, when he tries to use command-and-control regulations to achieve his goal of reducing carbon emissions. Not that regulations do not have their uses. But history tells that although regulations can help in some circumstances to reduce certain pollutants, especially those produced locally and with local effects, those regulations generally need market-oriented implementation to make them passably efficient, an exception being the effectiveness of CAFE standards for autos in cleaning the air. But that set of regulations did not entail a massive reorganization of the energy sector, as would be required by the Obama plan for reducing carbon emissions, a plan of the sort recently inflicted on the health care industries, and one that is not within the reach of ordinary mortals. Doubt that and look no further than Germany, once the growth locomotive of Europe, now struggling to keep its economy chugging along after deciding to recast its energy sector with no attention to cost, in pursuit of forestalling climate change.

Germany’s planners had reason for, shall we call it, self-assurance. Their economy has been the strongman of Europe. But that was before the Energiewende, or energy revolution, described by the Wall Street Journal as “a mammoth, trillion-euro plan to wean the country off nuclear and fossil fuels by midcentury and top domestic priority of Chancellor Angela Merkel.” One data point does not a trend make, but there is foreboding in Germany’s boardrooms after the economy contracted by an annualized 0.6 percent in the second quarter of this year. German businessmen believe that implementation of the planners’ goal to get at least 80 percent of the energy they need to run their factories from renewables by 2050​—​a more ambitious goal than that of the EU’s central planners​—​will shrivel the industrial base, hitting small and medium-size firms the hardest. The projected cost of $1.4 trillion is about what the country spent on the reunification of western and eastern Germany, reckon the Wall Street Journal’s economists. Noted energy economist Daniel Yergin, who rarely permits himself apocalyptic statements, says, “Germany’s current path of increasingly high-cost energy will make the country less competitive .  .  . , penalize Germany in terms of jobs and industrial investment, and impose a significant cost on the overall economy and household incomes.” And benefit America, as German firms take their next rounds of expansion here in order to benefit from low-cost fossil fuels, the ones Obama wants
to eliminate.

Fast-forward from the grumpy boardrooms of Berlin to the summit meeting of world leaders in New York City later this month. President Obama wants to set the stage for an agreement next year that would compel other nations to pass legislation that would set limits on their carbon emissions, and require the wealthier among them to cough up enough money to induce poorer nations to set their own emissions limits. But he has a problem​—​two, in fact. To accomplish his goals within the bounds of the Constitution he will need Senate ratification of a treaty, and to pass money from American taxpayers to developing countries he will need House appropriation of such funds. Neither the Senate, no matter which party controls it next year, nor the House will give him what he needs. So the White House is trying to figure out a way around the inconvenient Constitution and is planning to disguise the agreement as a mere updating of earlier treaties. 

If the president succeeds, environmental activists will be delighted​—​and will lose. For one thing, if leaders of other countries agree to pass legislation placing binding limits on their industries’ carbon emissions, while the American president and leading advocate of such legislation does not and cannot, they will have a lot of explaining to do to their own parliaments or governing institutions, especially since Obama will be pursuing a new career while they will be left with legislation and commitments that he could not persuade America to adopt. For another, experience in Britain, Germany, Spain, and other countries suggests that there is a point at which rising energy costs sap support for environmental protection measures. By going too far, driving household energy bills up, encouraging industries to relocate to lower-cost nations such as ours, environmentalists are causing subsidies for renewables to be brought into question, and green goals to be subordinated to job-creating growth.

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