Why a Green New Deal Is More Expensive Than Joe Biden Realizes

From Mises.org (Mar. 10):

One of President Biden’s first executive actions was to declare January 27 “Climate Day.” This ad hoc holiday provided an opportunity for his administration to celebrate the latest rationale for economic central planning. The day’s festivities began with three executive orders on climate change, science, and technology.

In his remarks, Biden bundled his environmental agenda with a jobs program, along with a broader policy to address social inequality and environmental injustice. Among the ambitious goals of Biden’s $2 trillion Green New Deal are 1 million new high-paying union jobs in the automobile industry, half a million electric car charging stations, and a 100 percent carbon pollution–free electric sector by 2035.

The goal of transitioning the electrical grid to zero carbon emissions in the next fifteen years stands out as a singularly misguided effort. Even granting the nonobvious assumption that we must immediately transition away from fossil fuels, overhauling the American energy infrastructure is a vast and complex calculation problem. To be truly sustainable, individuals and firms would need to act on local knowledge, assessing where and what kinds of renewables might meet their energy needs.

The concept of “net energy” illustrates why replacing fossil fuels with large-scale renewable energy is often counterproductive. In Carbon Shift, a 2009 book discussing peak oil and climate change, David Hughes summarizes it like this:

A two-megawatt windmill contains 260 tonnes of steel requiring 170 tonnes of coking coal and 300 tonnes of iron ore, all mined, transported and produced by hydrocarbons. The question is: how long must a windmill generate energy before it creates more energy than it took to build it? At a good wind site, the energy payback day could be in three years or less; in a poor location, energy payback may be never. That is, a windmill could spin until it falls apart and never generate as much energy as was invested in building it.

This life-cycle accounting of “energy return on energy invested” (EROEI) succinctly describes multiple stages of intermediate capital within a hydrocarbon-based structure of production. Hughes also hints at the basic questions facing all entrepreneurs—namely, where they should place their investments and how they should configure heterogeneous capital to recoup up-front costs plus some profit or “windfall.”

Wind turbines and solar panels do enjoy a wide market in off-grid applications, such as remote farm properties and on oceangoing sailboats, where the abundance of wind and scarcity of petroleum products makes the investment a no-brainer. In sunny parts of the country, solar has reached “grid parity.” States like Texas, however, have failed to heed considerations of both net energy and supply and demand in installing massive wind farms at great taxpayer expense where fossil fuels would be far cheaper and more reliable. Lacking price signals, the central planner is blind to the economic consequences of his grand designs. [read more]