The high costs of an accelerated green transition
Demands to dramatically curtail fossil fuel production and accelerate the green energy transition may be noble, but a premature pursuit would damage the country. Recent advancements in renewable energy have been remarkable, but we remain at least decades away from a world where fossil fuels can be replaced or even meaningfully supplanted as an energy source by wind and solar power.
Key hindrances include a lack of storage capacity or other ways of dealing with intermittent power sources, a lack of viable options to shift industrial energy consumption to alternative fuels, and the need for massive longterm investments in energy transmission infrastructure. Meanwhile, investment in new fossil fuel production is declining much more quickly than future demand. This is a recipe for higher prices and energy insecurity.
Setting aside the impracticality of a rapid energy transition, it’s important to consider who bears the highest cost of this scenario — the working class. Many argue that curtailment of fossil fuel production is especially imperative for lower income Americans, as they are purportedly most vulnerable to the coming ravages of climate change.
Yet one of the most beneficial actions that could be taken for low income and working class Americans would be to rationalize regulations and streamline permitting to unleash American energy production and associated infrastructure ( both fossil and green). The benefits are two-fold.
First, the savings from reduced energy costs will disproportionately benefit the working class. Second, abundant and relatively cheap American energy will make the jobs frequently occupied by the working class more competitive globally and thus improve economic prospects and job security.
Increasing energy costs have the effect of a regressive tax, most afflicting those with lower incomes. The share of disposable income a poor or working-class family spends on electricity, heat, gasoline, and food is much higher than is the case for wealthier families.
For millions of working-class Americans, trade-offs like deciding whether to buy groceries for their family or to pay $50 more per week on gasoline or home heating are real. Actions to reduce energy costs have an immediate and outsized positive impact on their financial well-being. The current energy-scarcity-induced cost-of-living crisis in Europe gives us an illustration of these effects.
In addition to reducing costs for consumers, abundant and affordable energy could also benefit American businesses. This effect would be most acutely felt in manufacturing and other energyintensive industries, which employ a disproportionate number of working class Americans.
This increased competitiveness will make capital investment in expansions and new facilities more appealing for firms, and these decisions will drive increased employment opportunities and more competition for labor. Likewise, employers will be able to pay their workers more and are less likely to shutter their plants or shift jobs overseas. These broad benefits come in addition to the direct impact of jobs created in energy, chemicals, plastics, and other industries closely tied to fossil fuel production.
Some might argue that the extra money in your pocket and improved job prospects count for little if our energy policies result in a world rendered uninhabitable by rising seas and disastrous weather caused by climate change. Yet, from 2005 to 2020, roughly corresponding to the first decade and a half of the shale fracking revolution and a dramatic increase in US oil and gas production, the EPA reports that US carbon emissions declined by 20%. Meanwhile, energy costs declined, jobs were created, and tax revenues boomed.
By comparison, Germany, at great public expense and with robust policy support, achieved a smaller emissions reduction without the attendant economic benefits. These policies also increased Germany’s reliance on foreign energy supplies, as the war in Ukraine is highlighting in excruciating detail.
Perhaps in the future we’ll look upon the Germans as sages, but the early results aren’t compelling, and the near future appears even less auspicious. At the least, we should accept that the relationship between energy production and carbon emissions is something short of linear.
The point is not that we should avoid promoting renewable energy sources altogether. There is clearly a role for wind and solar — and especially nuclear — in our energy future. All else equal, it’s perfectly reasonable to argue that we should prioritize renewable energy at the expense of fossil fuels.
But all else is not equal, and this is especially true for the least fortunate among us. For the foreseeable future, reliable and inexpensive energy at the scale required can be supplied with robust domestic fossil fuel production.