Claim: Senator Joe Manchin Fundamentally Misunderstands Climate Economics

Guest essay by Eric Worrall

Did Manchin’s concern about the Texas Blackouts just save the USA from Build Back Better? Washington based reporter Tim McDonnell wants you to understand why a deluge of government cash would have made everything better.

Joe Manchin has a fundamental misunderstanding of climate economics

By Tim McDonnell

Climate reporter

In a statement, Manchin said the bill would “risk the reliability of our electric grid,” and that reducing emissions “at a rate that is faster than technology or the markets allow will have catastrophic consequences for the American people like we have seen in both Texas and California in the last two years” (referring to blackouts in those states that were often misleadingly attributed to renewable energy).

But his argument is hollow for several reasons.

First, “the markets,” especially in the energy sector, have never existed in a government-free vacuum. The US currently subsidizes oil and gas production to the tune of about $20 billion per year, which gives those fuels an advantage over renewables that then need tax incentives. Although the US, as Manchin mentions in his statement, has a history of innovation in clean energy tech, it has surrendered its competitive advantage to China on emerging industries like the manufacturing of batteries and solar panels largely because of its unwillingness to sufficiently subsidize domestic production facilities.

Second, the bill directs much of its support toward the very technologies—utility-scale energy storage and improved grid transmission lines—that are needed to improve the “reliability of our electric grid” and to mitigate the risk of future blackouts as renewables become more widespread.

Finally, the most important flaw in Manchin’s reasoning is that it propagates a false choice about climate action: Either spend money on climate, or do nothing and save money. In reality, maintaining the status quo—in other words, plowing headlong into climate catastrophe—is by far the costlier option and more damaging to the US economy.

After Manchin’s announcement, Goldman Sachs lowered its GDP forecast for the US in 2022.

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I think the fundamental problem is many of the people promoting these gigantic government schemes have never tried to run their own business.

There are many more ways for things to go wrong than right. Anyone who runs a business knows every expenditure needs careful consideration. If I upgrade my laptop, will I be able to pay my kid’s school fees? Do I really need the upgrade now? Will the upgrade improve my productivity enough to justify the cost?

People who have never attempted to run a business and deal with these kinds of issues mostly don’t have this consciousness of risk. There are some exceptions, but for most people who have worked for someone else all their lives, money comes in predictable packets at set intervals. The laptop upgrade comes as a matter of course due to company policy. Government money comes from banks or printing presses. There is never any problem paying school fees from predictable wage income streams, unless you (gulp) lose your job.

If income is predictable and safe, what downside can there be, to the government gambling trillions of dollars on technologies which do not exist?

Senator Joe Manchin ran multiple businesses before he committed to full time to politics. He gets it, in a way many of his colleagues very obviously do not.

I have no problem with the government spending a few billion every year on research. Fundamental research into communication network resilience which nobody imagined would have commercial value led to the USA dominating the internet age. All the spinoffs from the space race, too many to count. People who want to commit their lives to understanding the universe, there is plenty of evidence the benefit of giving them a little support outweighs the cost many times over.

But that is where the government expenditure should stop. If the technology which scientists discover is not self sustaining, in the sense that businesses clamouring for access can go off and make a pile of money without further government help, in most cases no amount of government cash or market distorting rules will create an economic benefit for taxpayers.

via Watts Up With That?

December 20, 2021 at 08:30PM

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