The applause for the climate agreement between President Obama and China ought to be an embarrassment. The President was snookered and apparently doesn’t know. China promised to cap emissions in 16 years and the President promised to increase emission reduction actions now. What kind of deal is that? It’s a bad economic and environmental.
China’s economic growth has slowed to 7% and perhaps it will slow some more but even at 5%, their economy will double by 2030. And to fuel that growth, China is building one new coal fired power plant each week. Is there anything in the agreement about stopping that construction? The closest hint is a slowdown sometime because it says that it will produce 20% of its power by renewable sources by 2030.
Wind and solar remain high cost, niche sources of electrical power that are intermittent, and still require a baseload source of power. Will that be nuclear, coal or natural gas. Alternative energy advocates are in search of the holy grail of wind and solar—storage. But so far, various storage sources are not commercially viable and are unlikely to be in the next decade. With increasing investments in coal fired power, the Chinese are not about to start a process that would result in large stranded costs.
While China will continue to pursue robust economic growth, President Obama will take our economy in the opposite direction, at least for two more years. The two major vehicles for achieving his increased emissions reduction targets are EPA’s clean power plant rule and its forthcoming proposal on a new, very onerous ozone standard. These two regulations will be among the most costly ever issued and they will lead to an accelerated retirement of coal fired power plants. When EPA first issued its proposed power plant rule it claimed that it would only result in the loss of about 9GW of power. Utilities have already announced the closure of33GW or 10% of our power generation. Some of these reductions will be offset by natural gas powered units but that is not what the Obama Administration is pursuing. It wants to move like Germany and some other EU countries to wind and solar. And like those countries, the net result will be much higher electricity costs, higher unemployment, and lost capital investment. The average US kwh cost is 12 cents. In Germany it is 32 cents.
While a republican Congress cannot completely stop the President from executive actions—a tool of an imperial presidency—it is not powerless. A robust hearing process can inform the public of the economic risks of feckless actions and the appropriation process can be used to constrain EPA’s ability to implement and enforce. Lawyers will get richer because there will be a great deal of litigation over both the clean power plant and ozone regulations. But in the meantime, our slowly recovering economy will be subjected to additional and unnecessary uncertainty.
This agreement is supposed to jump start negotiations for a new climate treaty in 2015. It won’t. Developing economies are not going to agree to give up their economic aspirations and it is almost a certainty that the Senate will pass a resolution similar to the one passed prior to Kyoto that advised the President not to agree to a treaty that will damage our economy and exempt other nations. Such a resolution will send a powerful message that any treaty that is likely to emerge from Paris next year will not be ratified.
Only an excess of arrogance would lead a President to embrace an agreement that is economically damaging and void of any scientific foundation. While the American people may be concerned about the effects of climate change, the longer the pause in warming lasts the less they will accept that the American way of life is the cause. In the end, this will be a case of the American people believing their eyes and not what zealots tell them to believe. Facts still matter.
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