The United Nations estimates it would cost $30 billion a year to end world hunger. That sounds like a lot, but the world spent more than ten times that amount in 2012 on global warming mitigation, according to a recent Climate Policy Initiative (CPI) study.
And the UN says the world needs to spend even more on global warming mitigation. Much more.
According to the Reuters analysis of the Summary for Policymakers of the United Nations Intergovernmental Panel on Climate Change’s Fifth Assessment Report, due to be released this April, the UN is calling on the world to invest an extra $147 billion a year in wind, solar, and nuclear power from 2010 to 2029. If we add that figure to CPI’s measure, the UN wants us to spend approximately $506 billion a year to mitigate global warming,
According to the UN, this amount would end world hunger for nearly 20 years.
It’s important to ask what sort of return we can expect from these investments. As the Nongovernmental International Panel on Climate Change reports, the human effect on climate “is likely to be small relative to natural variability, and whatever small warming is likely to occur will produce benefits as well as costs.”
If governments were any good at generating returns on their spending of taxpayer money, they would have been investing in horizontal drilling and hydraulic fracturing technologies in the 1980s. Far and away, such investment would have generated the best returns, both financially and in terms of carbon dioxide mitigation.
According to a new report from the National Oceanic and Atmospheric Administration (NOAA), “CO2 emissions from U.S. fossil-fuel power plants were 23% lower in 2012 than they would have been” without the increased use of natural gas produced from hydraulic fracturing.
Neither big government nor big business sparked this boom. Most if not all of the five major integrated oil and gas companies did not predict the great increase in shale gas development as a result of the technological breakthroughs with smart drilling and hydraulic fracturing. The pioneers were the industry’s small to midsize companies.
Ironically, not only does the UN call on the world’s governments to spend much more on renewable energy and other warming mitigation initiatives, they also want fossil fuel energy investments to be reduced by $30 billion annually. Yet the latest energy breakthrough was a fossil fuel technology that’s doing more to lower carbon dioxide emissions than any other action.
Ideally, government investment in all energy sources would be reduced to zero. That would expedite the next technological breakthrough. As Vaclav Smil wrote for Scientific American:
Governments cannot foresee which promising research and development activities will make it first to the free market, and hence they should not keep picking apparent winners only to abandon them soon for the next fashionable option.
Smil says governments do this because they base their policy-making on wishful thinking rather than realistic expectations.
This is exacerbated by the vague and idealistic nature of the strategy for “investing in low-carbon technologies.” Imagine asking your financial advisor what to do with your retirement portfolio and all he or she says is to “invest in stocks.” You’d have plenty of room for error. In calling for investment in low-carbon technologies, the UN and its U.S. adherents basically tell us to invest as much as we can get the taxpayers to bear. As to what “portfolio” of technologies to spend on, we’re given no cost-benefit analysis of returns on investment, only vague promises that “wind and solar” will become more efficient if we spend more. Yet they are so far away from ever competing with fossil fuels that the spending so far has been basically wasted.
Consider, for example, the U.S. Department of Energy’s Section 1705 Loan Guarantee program. A December 2013 Reason Foundation study found 22 of the 26 companies that received the loan guarantees were rated as “junk” grade investments or lower, and the other four were rated as low class. The researchers found 83 percent of such “investments” went directly to solar, ignoring the fundamental investment strategy of diversification by betting all the available taxpayer funds on a single technology with the smallest market share. When the researchers dug deeper to see how this came to be, they found the taxpayer funds were allocated in proportion to the recipient’s lobbying expenditures. The loan allocations had more to do with political connections than the companies’ merit.
If there is a significant public interest in changing the nation’s energy production, governments should invest their taxpayers’ hard-earned money only in energy forms that are scientifically proven to accomplish real increases in productivity and the climate-reduction goals they are pursuing (however unwisely). Jumping from one fad to the next wastes taxpayer money and distorts an industry that’s central to the nation’s economy and people’s well-being.
Taylor Smith ([email protected]) is a policy analyst at The Heartland Institute.