If COP26’s mission is to limit temperature increases to 2 degrees Celsius by mid-century, free marketers say that it will fail. The international trend is to throw money at clean energy solutions, they say — a far less effective remedy than relying on tax reductions for qualifying businesses.
Their reasoning: countries that are the most economically free will also have the resources to address their climate concerns. By contrast, those with the tightest regulations will settle for having electricity — no matter how dirty. But the beef is that the private sector does not move with the same urgency. The public sector must therefore take the lead in this case.
As for the Democratic energy policies, $550 billion is the biggest part of the new $1.75 trillion Build Back Better plan that they say is fully paid for.
But what is the fundamental difference between giving companies a tax cut for selling green energy and giving them grants for generating low-carbon electricity? Are they distinctions without a difference — progress paid for by taxpayers under either circumstance? “Fundamentally, we need serious solutions,” says Drew Bond, president of C3 Solutions, at a discussion hosted by the Grace Richardson Fund and OurEnergyPolicy.org.
“The most serious ones are based on free-market economics,” he continues. “Forcing utilities to buy a certain amount of electricity is a top-down solution. There ought to first be a whole lot of competition. If we can’t achieve there, let’s look at it again.” C3 is a conservative organization — ‘less government, not more government’ — dedicated to addressing climate change.
According to the U.K.-based Chatham House, if global emissions follow their current trajectory, there is less than a 5% chance of keeping temperatures below the 2 degrees Celsius mark by mid-century — the goal of the 2015 Paris climate talks. And there is less than a 2% chance of keeping them below the 1.5 degree Celsius mark. Worst case: temperature increases at 7 degrees Celsius by this century’s end — replete with droughts and higher mortality rates.
“If emissions do not come down drastically before 2030, then by 2040, some 3.9 billion people are likely to experience major heatwaves — 12 times more than the historic average,” the report says.
Fossil fuels remain a linchpin of the global economy. But that is changing among developed countries. Coal, for example, once dominated electricity generation in the United States. Today, it is at 22%. Renewables, meanwhile, were once an afterthought and now they represent 18%. Natural gas makes up 38%. The two are replacing coal. Nuclear is about 20% — the biggest share of this country’s carbon-free power.
Consumer demand, technology, and government action led to the changes — each a vital piece of the puzzle. And now the private sector is setting the example: Apple
and Microsoft Corp.
plan to be carbon neutral by 2030. Meanwhile, AT&T says it will hit its net-zero targets by 2035 and Unilever
, and Amazon will do so by 2040. The United Nations says that 177 multinationals have made such a vow.
According to IRENA, investment in the clean energy sector is now at $330 billion a year. But if the 2050 goals are to be reached, those levels must nearly double to $750 billion annually. To hit the Paris agreement’s targets, it says that renewable energy deployment must increase six-fold, adding that the returns are three-to-seven times on those investments. And that requires more incentives. The Oxford Smith School of Enterprise and the Environment notes that public investment in green technologies have a long-term payback for taxpayers.
Global electricity markets with the fewest restraints are realizing greater declines in CO2 releases, insists Rod Richardson, co-founder of Clean Capitalist Leadership Council. Tax cuts would stimulate clean energy markets even more. “I believe that COP26 will fail unless they change the policy paradigm,” he says, adding that “Climate is a threat to our planet and our security.
“But more importantly, the lack of freedom is a threat,” adds Richardson, also part of the Grace Richardson Fund. “Globally that lack of freedom is driving climate change. If you want to hit multiple nails on the head then attack climate change by expanding freedoms rather than pursuing mandates and regulations.”
“I’m not sure what is free-market about transferring wealth from taxpayers to companies,” adds Katie Tubb, senior policy analyst for the Heritage Foundation. “What we are trying to do is to show the problems of high regulation and high spending. We want to amplify free markets to get affordable energy. We don’t know all the answers. Let’s put the answers into the dispersed creativity of people.”
Supporters of President Biden’s climate agenda say that it is a long slog to decarbonization and that only the federal government has the muscle to address the gravity. Witness the United Nations just-issued report: greenhouse gases hit record highs in 2020. “There is no time to lose,” says World Meteorological Organization Secretary-General Prof. Petteri Taalas.
Consider the expansion of solar and wind: in 2009, 2,000 megawatts of solar energy and 25,000 megawatts of wind energy were deployed. Today, 100,000 megawatts of solar energy and 140,000 megawatts of wind power exist.
The president’s goal is 80% clean energy by 2030 and 100% by 2035 — something that will require a reliable source of backup power and more long-distance, high-powered transmission lines. Just reaching the 80% threshold would avoid $1.7 trillion in health and environmental damages, says Energy Innovation. Just as importantly, the race to net-zero will create 500,000 to 1 million new energy jobs across the country in the 2020s alone, with nearly every state benefiting, adds the Andlinger Center.
“We are trying to change the engine on the plane while it is flying on fossil fuels,” says Arshad Mansoor, chief executive of the Electric Power Research Institute. “A clean energy future is a better future for society. But how do you get there? There is an urgency this decade to rethink the way we plan for variable generation … The reason we have this much wind and solar is because of incentives.”
It’s the classic chicken-and-egg question: should the private sector or the government take the lead. And history has shown that it depends on the degree of urgency: a river on fire requires immediate action as does a world economy at risk because of a pandemic. Moreover, to suggest that energy markets operate without government involvement or subsidies is to deny reality. Each sector has been on the gravy train, which makes the difference between conservative tax cuts and progressive government grants a bit murky and a product of political posturing.