H. Sterling Burnett, Heartland Institute
In Climate Change Weekly 419, I detailed some of the policies Joe Biden has imposed as president that have contributed to higher energy prices and the inflation affecting other goods and services now plaguing average American households.
“[Climate change is] the number one issue facing humanity. And it’s the number one issue for me,” said Biden.
Among the steps Biden has taken to fight climate change: he cancelled the Keystone XL pipeline partnership with Canada, on his first day in office, possibly the first time in history a president used his first day in office to kill thousands of American jobs and disrupt critical infrastructure; shortly thereafter, Biden imposed a moratorium on new oil and gas leases on federal lands and on the U.S. outer-continental shelf. Since then, Biden has cancelled oil and gas leases in the Arctic National Wildlife Refuge; proposed methane emission restrictions that would make it harder and more expensive to develop, store, and transport oil and natural gas in the United States; proposed increasing the fees and royalty rate oil and gas producers must pay the federal government; and recently announced plans to foreclose drilling on more than half of the National Petroleum Reserve-Alaska.
Biden’s efforts to fight climate change by hammering U.S. production of fossil fuels have resulted in dramatically higher fuel and food prices. Energy is the master resource, the lifeblood of the economy. Energy abundance and the low prices it brings create jobs and keep the economy humming. Biden has ignored this fact to the detriment of consumers, employers, homeowners, and, importantly to his party’s sinking electoral prospects, voters.
How bad is it? How much have energy prices risen since Biden entered office and started waging his war on domestic energy? My colleague at The Heartland Institute, energy and environment Research Fellow Linnea Lueken, has crunched the numbers for a forthcoming Heartland Institute publication. This is what she found during Biden’s first year in office:
- Residential electricity prices rose 11.3 percent.
- Natural gas prices rose 86.34 percent.
- Regular gasoline prices have risen by 42 percent and diesel rose by 38.9 percent.
These are just the current, known results of Biden’s energy policies. When one recalls Biden has pledged to implement policies to reach 100 percent “carbon” pollution-free electricity by 2035 and to reach net-zero emissions nationally by 2050, it is obvious these higher prices are just a small down payment on Biden’s ultimate energy plans.
While running for president, Biden claimed his comprehensive climate and energy plans would cost $2 trillion in just four years. As high as this figure is— equivalent to five times the amount that consumers and industry currently spend annually on electricity—it pales in comparison with estimates recently calculated by the consulting firm McKinsey & Company.
McKinsey’s report, “The Net Zero Transition,” provides a detailed analysis of the costs involved in hitting net zero by 2050.
The report states the economic cost of the transition will be a staggering $275 trillion by 2050, or approximately $30 billion per day for the next 25 years. With an almost laughable degree of understatement, the McKinsey reports states, “our estimates of the annual spending on physical assets for a net-zero transition exceed to a meaningful degree the $3 trillion–$4.5 trillion total spending estimates that previous analyses have produced.”
As high as these figures are, McKinsey admits its analysis is not comprehensive:
In particular it does not focus on such issues as technology breakthroughs, physical constraints related to scale-up capacity and the availability of natural resources, delayed-transition costs, the role of adaptation, or other imponderables or uncertainties, nor have we yet modeled the full range of economic outcomes likely under a net-zero transition. As a result, it is likely that real outcomes will diverge from these estimates, particularly if the net-zero transition takes a more disorderly path or restricting warming to 1.5°C proves unachievable. Spending requirements could be higher, for example due to the additional investment needed to maintain flexibility and redundancy in energy systems, or heightened physical risks and commensurate adaptation costs.
Nor does McKinsey’s report address the kinds of political losses that, based on past experience, one should expect to occur in the process of implementing a large-scale makeover of the energy system underpinning the economy, via special-interest lobbying and the operation of government itself. For every significant policy change, those who expect to be harmed or disadvantaged and those who expect to benefit from or be advantaged by it devote massive amounts of money and resources to shape the legislation as much as possible in their favor. In addition, significant money, resources, and manpower are diverted to government agencies to establish rules and mandates for the transition, monitor its implementation and measure its results, and police the programs and punish lawbreakers.
Losses to transaction costs are high for every significant piece of legislation. How much higher will they be for the kind of comprehensive, economy-wide redesign necessary to reach net zero?
To some degree, McKinsey’s analysis presents a best-case scenario: the costs of hitting net zero will be $275 trillion by 2050 “if all goes right, the transition is smooth with no unexpected technological failures or resource shortages, no cheating, and government operations are efficient.”
The net-zero equation remains unsolved…, nor is the world prepared to complete the net-zero transition. … Nor would execution be easy: solving the net-zero equation cannot be divorced from pursuing economic development and inclusive growth. … It could also have knock-on impacts on the economy more broadly, potentially creating a backlash that would slow down the transition. …
Achieving net zero would mean a fundamental transformation of the world economy, as it would require significant changes to the seven energy and land-use systems that produce the world’s emissions: power, industry, mobility, buildings, agriculture, forestry and other land use, and waste.
Is that all we’d have to do?
Even this dramatic economic overhaul may not be enough to prevent the supposed climate crisis.
“First, it is not clear whether a 1.5°C scenario is achievable in the first place, nor what pathway the world would take to achieve it if it were,” writes McKinsey. “Indeed, even if all net-zero commitments and national climate pledges were fulfilled, research suggests that warming would not be held to 1.5°C above preindustrial levels….”
A forced economic transition greater than any in history, at costs exceeding any in history and far above what has been previously estimated; that’s what net zero requires. Even so, the result is likely to be for naught, with the dreaded 1.5℃ temperature rise still exceeded.
The good news is that the massive forced transition to net zero is not necessary, even if it were possible and governments and industries could be relied on to carry it out efficiently and without corruption.
As shown in the myriad fact sheets provided at Climate at a Glance, extreme weather is becoming neither more common nor more severe, and a modest 1.5℃ temperature rise does not threaten to destroy either human civilization or the Earth. The Earth abides, and humans have lived through more severe and dire climate changes in the past than any that could reasonably be expected to result from rising greenhouse gas emissions in the future.
H. Sterling Burnett, Ph.D. is a Heartland senior fellow on environmental policy and the managing editor of Environment & Climate News.