What something costs is important. It's important in personal decisions about what to buy and what not to buy. It's important in governmental decisions about what policies to adopt and what policies to reject.
The importance of cost is relative but irreducible. Cost must be weighed against other factors in decisions about purchases and policies. But the influence of cost cannot be diminished or annulled by wish or decree. Cost always matters.
Energy by fiat thrives on the distortion of cost; therefore, energy by fiat consistently fails. Energy by fiat uses mandates and subsidies to propel into the market energy forms otherwise unable to compete. It thus displaces competitive energy with costlier substitutes, compensating the discrepancy with some combination of increased taxation and elevated price. Whatever the mechanism, people pay for energy by fiat.
Obscuring the pain
Governments practicing energy by fiat do their best to obscure the economic pain. They (incredibly) deny that the costs exist. They (incredibly) assert that jobs created through spending on government-sponsored energy offset the imposed burden. And they (incredibly and most desperately) declare their energy-policy goals to be of such transcendent importance that immediate costs pale in relation to eventual benefits of their vision.
Europe shows what happens when officials subordinate cost—real, measurable, immediate cost—to loftier aspiration. The European economy is torpid in large measure because of costs imposed by heavy subsidization of nonfossil energy. In many European countries, household electricity costs have leapt painfully. Rising energy costs have eroded the competitiveness of European industry. For years, European leaders have acted on the conviction that benefits of leadership in the decarbonization of energy warranted the immediate cost. Now Europeans suffer as a result. And individual European governments and the European Union are moderating their support of high-cost energy.
The US government shows no sign of having learned from European mistakes or from its own dreadful experience with mandates for biological fuels. The renewable fuel standard punishes refiners and importers for not selling more ethanol than the market can use and more cellulosic biofuel than producers can supply. The program, energy by fiat undertaken to enlarge the corn market, is broken.
Undaunted by wreckage nearby and abroad, the administration of President Barack Obama presses a flawed agenda. In his State of the Union Address in January, Obama repeated his goal of raising taxation of fossil energy to fund "fuels of the future." And as if to underscore the administration's reluctance to learn from events, a high-ranking member this month addressed cost from a perspective most gently described as creative.
"You cannot simply factor in the immediate costs of energy needs," declared Sec. of State John Kerry in a call-to-arms in Indonesia on climate change. "You have to factor in the long-term cost of carbon pollution. And they [sic] have to factor in the cost of survival. And if they do, then governments will find that the cost of pursuing clean energy now is far cheaper than paying for the consequences of climate change later."
Costs become intolerable
Kerry asserts his conclusion here and masquerades the exercise as economics. The costs of replacing high-cost energy with cheaper alternatives are prompt and certain. The long-term costs of "carbon pollution" are—notwithstanding Kerry's claims—wildly speculative. Climate science, which Kerry vapidly described as "absolutely certain," can measure human emissions of greenhouse gases but remains absolutely uncertain about how incremental gases affect global warming net of other influences. "Pursuing clean energy now" might, in fact, have precious little influence on "climate change later." To meaningfully cut greenhouse gas emissions requires energy adjustments so severe that costs, as Europe now knows, quickly become intolerable. Even if the sacrifice were made, the effect on global warming might well be negligible.
Governments are too reluctant to address weaknesses of the theory driving climate change activism. They resort too quickly to energy by fiat. Doing so always costs too much.
