Because strangulation represents coarse policy on any subject, a bill addressing international energy finance floated by Lisa Murkowski, chairman of the US Senate Committee on Energy and Natural Resources, deserves attention. The Alaska Republican on Aug. 15 released a discussion draft of legislation that would direct the Secretary of the Treasury to oppose restrictions by multilateral development banks on specific energy forms.
The bill responds to initiatives at several financial institutions, including the World Bank, to quit financing projects involving coal or, in some cases, all fossil energy. Those moves are misguided for several reasons:
- They align international finance with an extreme political agenda that illogically asserts a scientific consensus supportive of worst-case scenarios about climate change and the urgent need for response. Agenda promoters are exploiting a year of particularly hot weather in much of the world to peddle gloom. And undiscerning reporters hawk the narrative with distortions about an existential threat and a mere dozen years in which to react.
In fact, not all scientists think climate conditions are that dire. Yet only doomsayers make the evening news, and only the scariest projections are reported as “settled science.” The filtering is dangerous not only because of the policy mistakes to which it might lead but also because of how it discredits both science, which is never settled, and the media, which are insufficiently quizzical on this difficult subject.
- Institutions spurning fossil-energy investments hinge their policies to temperature targets set in the 2015 Paris Climate Summit. Numbers derived from calculations based on uncertain variables are convenient for political sloganizing but little else. Too little is known about climate mechanisms to meaningfully link globally averaged temperature and greenhouse-gas concentrations with enough precision for effective policy-making.
Climate policy should target emissions of GHGs and let temperatures, closely studied, respond as they will. Moderation of GHG emissions by itself would represent progress and might well be enough.
- When multilateral development banks promote extreme climate policy, they and their sponsoring countries align with statist economic interventions that seldom prove constructive. Initiatives like the Green New Deal proposed by Democrats in the US, which would combine nationalization of energy with radical welfarism, should make them skeptical.
- Denying struggling countries international financial help with resource development forecloses an important way to generate wealth. And diverting capital from fossil-fuel power generation closes access to affordable electricity by people who need it. Multilateral development banks exist to fight poverty. Spurning fossil energy contradicts the mission.
- Steering investment away from fossil energy serves energy utopianism but not genuine energy imperatives. The animating folly of energy discourse today is that hydrocarbons can be replaced readily by renewable forms such as solar and wind. This iconic energy transition cannot happen as fast as its adherents wish. Policies that attempt to accelerate the process can only raise costs and hurt people.
Even as renewables gain share of the energy market, as they will continue to do, oil and gas will still be needed. And natural production decline will sustain the need for investment in fluid hydrocarbons. That practicality is not popular in contemporary climate politics, but for development banks to ignore it is irresponsible.
- Climate remediation based on strangulation of fossil energy won’t help the climate. It will raise energy costs enough to generate political resistance, partly against specific policies, partly against climate remediation more broadly, and partly against perceived oppression by official and academic elites. Pushback such as this helps roil politics in Europe, Australia, and Canada. It will happen in the US if Washington, DC, too, succumbs to the seductions of climate leadership. Banks shouldn’t entangle themselves in this fruitless cycle.
Better ways exist to address climate change than by choking wealth-generating industries and loading unnecessary costs onto their customers. Multilateral development banks should prefer real solutions to futile gestures.
The oil and gas industry should support Murkowski’s effort to keep banks focused on their mission.