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Costly Climate Change Intervention

June 26, 2013 in Economics

By Paul C. "Chip" Knappenberger

Paul C. “Chip” Knappenberger

On Tuesday, President Obama announced a series of executive actions aimed at reducing greenhouse-gas emissions, with hopes of mitigating climate changes. His “Climate Action Plan” is neither necessary nor effective, but it will be costly.

By promoting limits on greenhouse-gas emissions from U.S. power plants while increasing “green”-energy incentives, the president is trying to steer our energy choices away from the free-market course and toward the direction of his liking.

Americans will pay more to make clean energy cleaner.”

This is a dangerous undertaking, and one with a far-from-certain outcome. Government intervention in financial markets was the root of the Great Recession. Government intervention in the energy market carries an even greater risk, as energy drives everything.

The justification for this risk is just not there.

U.S. greenhouse-gas emissions are already on the decline and have been for about a decade now. The majority of this downward trend is not the result of government regulations restricting greenhouse-gas emissions, but rather technological innovations in the energy industry. Techniques such has horizontal drilling and hydraulic fracturing, commonly known as fracking, have opened expansive natural gas and oil reserves that were considered unrecoverable only a few years ago.

Consequently, cheap, reliable electricity produced by coal is being replaced by even cheaper, reliable electricity from natural gas.

Because of its chemical makeup, natural gas, when burned, produces about half the amount of greenhouse gas emissions as burning coal. Therefore, as natural gas replaces coal as fuel for generating electricity, our greenhouse-gas emissions fall.

Granted, this is an unforeseen outcome. Natural gas fracking was developed to produce a cheaper fuel and outperform the competition, not to produce less greenhouse-gas emissions. The net result, though, is exactly the type of outcome that Mr. Obama wants to happen — a reduction of greenhouse-gas emissions — and it has been achieved without government incentives, taxes, or restrictions.

All the government had to do was stay out of the way.

In fact, it is arguable that had the government imposed regulations handicapping fossil fuels, these production techniques — now a cornerstone of Mr. Obama’s Climate Action Plan — may never have been fully developed as research efforts could have been diverted elsewhere.

Greenhouse-gas emissions in the U.S. are falling at a rate that is greater than the one laid out in the president’s plan. So why get involved at all?

When it comes to significantly slowing human-caused climate change — the reason …read more

Source: OP-EDS

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