Krupp v. Mills
POLICIES FOR THE NEXT ADMINISTRATION. PART 11: ENERGY
Response to Mark P. Mills
By Fred Krupp
Mark Mills argues that there is a geopolitical imperative for the United States to have an oil and gas export strategy. Evidence suggests the U.S. already has one. Over the last eight years the Obama Administration has approved 10 liquefied natural gas export terminals with capacity to export over 15 billion cubic feet of natural gas per day. Last year, Congress acted to lift the oil export ban, in place since the 1970s oil embargoes Mr. Mills references. There is no barrier to allies accessing American oil and gas resources, and some U.S.-produced gas is finding its way into foreign markets.
However, the ability to produce more oil and gas at home, whether or not we export it, does nothing to insulate the U.S. from the economic volatility of the global oil market. True energy security only comes as we reduce our dependence on oil and gas over time. And this is where energy security and environmental interests align. The Department of Defense regards climate change a threat multiplier; it is only logical to reduce dependence on the fossil fuels that multiply the threat. The energy industry is beginning to recognize the inevitable: Royal Dutch Shell, the world’s second-largest energy company, said last week that global demand for oil could peak in as little as five years. Numerous studies show that the U.S. and its allies can reduce fossil fuel consumption and associated carbon emissions substantially with technologies readily available today. I’ll be the first to join Mark Mills in support of increased R&D spending for advanced batteries and other technologies to accelerate our transition to electric vehicles and 100 percent renewable electricity. But our core challenge is less about moonshot technological breakthroughs and more about providing the price signal needed to bring existing technologies to market rapidly and at scale.
(For the opposing view, see Mark P. Mills, "The Path to a Bipartisan Energy Agenda.")
Response to Fred Krupp
By Mark P. Mills
Let me start where Fred Krupp and I agree. We both want a more secure America, a vibrant economy and more jobs, to “spur innovation, and strengthen manufacturing,” and to have all that with no pollution of any kind. And we agree that the “stakes are enormous.”
The stakes are high because energy is needed for everything people use and do, everywhere and always, even in the so-called virtual world of the Internet. If you watched the World Series streaming to your smartphone, for instance, your personal share of energy use, hidden in the vast digital ecosystem, was greater than driving 300 miles in a Prius. Consuming 100 GB of wireless data consumes roughly the same amount of energy as producing beef for 15 hamburgers. Smartphones are the SUVs of the information economy.
Mr. Krupp is focused on climate concerns as a policy motivator. But we don’t need to litigate the intricacies of climate claims to reach useful conclusions about underlying realities regarding energy supply and demand. Setting aside how we fuel our digital economies at a tolerable cost, there are billions of people in the world who lack adequate food, water, and shelter, never mind air conditioning, cars, vacations, and video games. When — not if — the world’s 4 billion poor rise to just 15 percent of our per capita energy use, they will add an America’s worth to global energy demand. That’s a sobering calibration. The sheer scale of global energy dynamics is precisely why Bill Gates highlighted the need to bring “math skills to the problem.”
No matter how earnestly one calls for “leadership, ambition, and urgency,” two core facts are unavoidable.
First, the laws of physics place strict boundaries around what technologies can do. Mr. Krupp (and many others) say that “we have the technologies to make deep cuts” into our dependency on hydrocarbons. The fact is we don’t, as Google’s engineers found. That reality is what motivated Mr. Gates’ call for “miracles.”
Mr. Krupp’s is right that America has recently reduced carbon dioxide emissions. But that came almost entirely from the massive increase in cheap shale gas underpricing coal. The cost-effectiveness of shale technology has improved (and is still improving) faster than solar and wind technologies.
Second, the laws of human behavior establish boundaries, especially regarding money and global governance. Hydrocarbons supply 80 percent of global energy; aspirational policies to eliminate that fact are all far too expensive in economic and political terms. The “historic” Paris agreement is, as everyone knows, a paper-thin unenforceable wish list. As the New York Times candidly reported: “For the climate accord to work, governments must resist the lure of cheap fossil fuels in favor of policies that encourage and, in many cases, require the use of zero-carbon energy sources. But those policies can be expensive.” This will be especially onerous for a world still coming out of recession. Consequently, climate-centric policy proponents are calling for “new supra- and transnational institutions” to “transform world economies” along with proposals for mandates “for global governance of energy…limiting final energy demand.” I think Leonardo DiCaprio best summarized prospects for a transformation that would have us “come together” as a world community: “The human race has never done anything like that in the history of civilization.”
Mr. Krupp is pleased with the new “global pact” to “control aviation emissions.” We’ll see what happens if the UN attempts to convert a PR victory with a voluntary pact into a real set of mandates. Regardless, aviation is political and economic small ball because aircraft account for 8 percent of transportation fuel use; cars and trucks use 80 percent. And policymakers are familiar with voters’ affection for cheap energy. Consider the latest news from the EIA as a shot across the policymakers’ bow: This past summer, low prices helped drive all-time records in gasoline use and miles traveled in America.
During the 2012 campaign, before the oil price collapse, President Obama said repeatedly: “We can’t just drill our way to…$2 gas." As it turns out, we could and we did. And it’s that astonishingly productive shale technology which is creating global head winds both for the oil and gas industry and for any non-hydrocarbon competition. People like cheap energy.
(For the opposing view, see Fred Krupp, "The Moment for Urgent Climate Action.")
Fred Krupp is President of Environmental Defense Fund.
Mark P. Mills is a Senior Fellow at the Manhattan Institute and served in the White House Science Office under President Reagan.