Monday, April 28, 2014

Setting Ourselves Up For Failure

Rep. David Moore has a column in the Missoulian taking on climate change activists who want the University of Montana Foundation to divest itself of its investments in fossil fuels. The problem, Moore thinks, is that these people are biting the hand that feeds them.

Moore claims that not only are the state and University already highly dependent on the taxes paid by fossil fuel (oil, gas and coal) producers, but that Montana’s “booming” energy industry represents the “single biggest opportunity for an expanded tax base” and for creating high wage jobs for college graduates. He also believes that unless we continue to expand fossil fuel production, the cost of energy will skyrocket and “3 billion” people will be consigned to “energy poverty.” 

But Moore grossly overstates the importance of energy production both for the Montana economy and for the state’s budget. He claims, for example, that there are “tens of thousands” of people employed by the “energy industry.” What he means by that is not clear, but between them, the Bureau of Economic Analysis and the Montana Coal Council list only about 4,500 jobs in coal mining and oil and gas extraction. He says that natural resources account for 20 percent of state tax revenue, but some of those natural resource taxes are from sources other than energy production and much of the money that the state appropriates comes from sources other than taxes. In 2012, for example, state taxes on oil, gas and coal production totaled about $181 million, which may sound like a lot, but only amounts to about 3 percent of the state’s total budget. And far from contributing to an expanded tax base, natural resource taxes have been essentially flat for the last 30 years.*

The larger problem with the claim that we should rely on growing fossil fuel production is, of course, that it puts us on a collision course with any commitment we might have, or hope to have, to combat climate change.  To arrest climate change, we have to reduce carbon emissions, and about the only way to do that is to burn less coal and oil. So we should not set ourselves up for failure by relying for our prosperity on the production of more fossil fuels.  We should, rather, prepare ourselves to be active participants in the fight against climate change, because like it or not, that’s a fight that’s going to happen. Indeed, that’s the logic of divestiture as well: prudent investors don’t buy into an industry whose decline is inevitable. Or if they have, they get out while the getting's good.

Moore, and for that matter other politicians on both sides of the aisle, argue that we can continue to burn fossil fuels and at the same time lower emissions if “we” invest in the development of the necessary technologies, by which they presumably mean carbon capture and storage. The “we” here must be the public, because at this point, private investors have no incentive to do any such thing on their own. But no matter who pays to develop it, carbon capture and storage, if it is feasible at all, is going to be costly and is unlikely to be able to substantially displace conservation, efficiency and renewables as cost-effective strategies for reducing emissions.** Coal and oil will not disappear entirely, but it is inevitable that their production must decline, and soon, if we are to arrest climate change before it is too late.

Fighting climate change may make energy more expensive, but the cost of renewables, conservation, and efficiency are coming down. According to the EPA’s latest inventory, US greenhouse emissions fell by 10 percent between 2005 and 2012, and there was no hell to pay. It’s doubtful that the poor of the world will have to live in “energy poverty” in order to arrest climate change. But one thing is clear: the poor of the world will incur a very high cost indeed if the rich of the world ignore climate change and insist on consuming cheap, fossil fuel based energy.

*Finding your way through the Regional Economic Accounts of the Bureau of Economic Analysis can be a little laborious, but if you want to give it a try, click here; you can find all sorts of information about production, employment and income by state and local area. You’ll find the Montana Coal Council site giving information about coal employment here and the numbers for taxes on energy production in the Department of Revenue’s Biennial Report.

** There’s a certain irony in the fact that, as I noted in an earlier post, Count on Coal Montana has touted a report that carbon sequestration would raise the cost of producing electricity by 80 percent. Now it turns out to be the deus ex machina that's going to make cheap fossil fuel available for the world's poor to enjoy.