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The Institute for Energy Research Gets It All Wrong on Regional Energy

It’s hard to even know where to start with the Institute for Energy Research’s attack on the regional energy paper just released by the Center for the Next Generation and the Center for American Progress.

One easy response would be to simply point out the failure of IER to even acknowledge the reality of climate change.  Ignoring the fact that our report consistently points to climate change as the most important driver of the transition to a cleaner energy future, IER pretends that we’ve instead written a paper about peak oil.  They write:

Yes, it is certainly true that in a physical sense, there is a finite amount of energy located within the United States—or planet Earth for that matter—in the form of oil, natural gas, and coal. But by the same token, even solar power is “finite”—the sun will eventually burn out.

The sun will, in fact, burn out in a few billion years.  But the global tipping point on climate change – the point at which the Earth reaches a 2 degree Celsius increase in temperature – will happen in as few as sixteen years if we don’t take steps now to stop it, or at least slow it down.

But I’m willing to take my cue from the presidential campaigns and leave climate change out of it, and just focus on IER’s central economic arguments about the advanced energy future.   And on these, too, they’re dead wrong.

The central critique in IER’s blog post is that oil, gas, and coal are profitable industries, and they pay taxes (a debatable point, but we’ll leave it alone), and therefore they are good for America.  On the other hand, goes the argument, renewable energy programs “need support from the taxpayers…which is an implicit admission that these energy projects would not receive investment from people who voluntarily could put their money at risk.” 

There are two immediate problems with this analysis.  First, these fossil fuel companies are profitable in large part because they do not put an honest price on their goods; instead, they pass the cost of adverse health impacts and climate change directly onto consumers.  The hidden cost of oil and gas consumption in the U.S. in 2011 amounts to a staggering $89 billion, based on the conservative findings  of a U.S. Government Working Group that tallied the social cost of greenhouse gases to be about $21 per ton; other studies say this figure is far too low.

Put another way, these companies are putting a product onto the market that causes billions of dollars in health and climate adaptation costs – costs that will primarily be paid by, you guessed it, taxpayers. That’s not even counting the taxpayer dollars that go into protecting these companies’ oil wells and pipelines all over the world.

The second problem is even more obvious:  the fossil fuel industry takes billions in direct tax incentives and subsidies every year.  According to analysis by TR Rose Associates , for the past three decades the coal industry has benefited from nearly $1 billion a year in subsidized public lands.  Oil and gas have benefited even more than coal, taking $5.16 billion per year in inflation-adjusted 2012 dollars.  And these industries have been receiving public support for over a century.

Let’s compare that to the renewable energy industry, a relatively new recipient of government support, that according to the same analysis, receives $390 million per year in subsidies. Biofuels receive about $1.1 billion per year.  Or, phrased another way: the federal commitment to supporting the oil and gas industry every year is about 3.5 times greater than its commitment to the renewable and biofuel energy industries. 

There’s a reason the oil and gas industry got subsidies 100 years ago, and it’s the same reason the renewable energy industry gets them today:  when a country is in the midst of transforming its energy sector, it needs to support its new and emerging companies.  Not one single energy technology came into existence in this country without some level of public support.  Neither, incidentally, did one single piece of energy infrastructure.  Our highways and power grids were built and are still mostly maintained with public dollars. The huge trans-Alaska oil pipeline runs across nearly 800 miles of public lands. 

But there’s a time and a place for government support for energy projects, and it’s not when that support is literally a wealth transfer to huge multinational corporations that does little to increase production or reduce the cost of that energy to American consumers. 

What makes far more sense, and what we argue in our report, is a national commitment to a more advanced energy system that actually addresses climate change while – incidentally – spurring innovation and creating jobs. 

The fact here is that America’s recent green investments, at the federal and the state levels, have produced real and verifiable returns.  For the past few years, the clean energy and sustainability sector has been the bright spot in the U.S. economy, creating more jobs, and higher paying jobs at that, than the economy as a whole.  Even during the recession, the clean energy sector grew at a rate of 8.3 percent a year, on average, nearly double the growth rate of the overall economy. 

And on the renewable energy front, the entire nation has been making remarkable gains across a diverse portfolio of generation technologies. In Los Angeles County, for example, workers in the green sector command wages with a 50 to 100 percent premium over the average job in LA County.  Compare that to the findings of the Western States Petroleum Association—an oil industry group—that half of California’s jobs directly related to fossil fuels are gas station attendants earning about minimum wage.

And it’s not just the West that’s gaining jobs.  As our report points out, every region of the country has seen gains from the move to a new set of energy industries and occupations.  Here are just a few examples:

  • Developing 54 gigawatts of offshore wind in Atlantic waters would generate $200 billion in economic activity and create 43,000 permanent, well-paid technical jobs, in addition to displacing the annual output of 52 coal-fired power plants.
  • Retooling the auto industry to build the next generation of vehicles has proved to be one of the most effective elements of a national recovery, adding more than 230,000 direct jobs in manufacturing and auto sales since the low point of the recession in mid-2009.  That adds up to 14 percent growth, far outpacing the economy as a whole.
  • The solar industry in California has experienced significant growth over the past 15 years.  Since 1995 the number of solar businesses grew by 171 percent, and total employment jumped by 166 percent. As a point of comparison, the total number of California businesses has grown by 70 percent, and employment has increased by 12 percent.

All these success stories, combined with the simple fact that clean energy helps slow climate change, help explain why the American public – those same taxpayers IER cares so deeply about – overwhelmingly support a move toward a cleaner national energy system. In fact, Harvard and Yale researchers have found that the average American is willing to pay $162 per year more to support a national clean energy standard, which is just one policy we recommend in our report.

There is still a long way to go when it comes to truly transforming our energy economy, but the seeds of that change are already sprouting in every region in the country.  And one thing is for sure:  if the American people have any say, that transformation will happen many, many, many millennia before the sun begins to show any signs of fatigue. 

Let’s hope, for the sake of our planet, it happens a whole lot quicker than that.

Thanks to Omar Aslam for his research support.

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