"We pledge to adopt policies aimed at creating jobs and growth. We will seek to take the appropriate steps, recognizing our individual circumstances, to establish sound macroeconomic policies to spur stronger economic growth."
Thank goodness world leaders feel no obligation to abide by their summit meeting promises. The world would be a much more confusing place if they did. Last month, heads of state at the Earth Summit in Rio de Janeiro signed a sweeping environmental agenda, one piece of which called on governments to promote technologies to replace fossil fuels. This month, Group of Seven (G-7) leaders, representing the world's most important economies, made the above pledge to work toward economic growth.
What's missing from this picture?
SUMMIT CONFLICTS
Even though nobody takes summit pledges seriously, the contradictions are striking. Do governments around the world truly intend to abandon the fuels on which the past century's economic progress has been based? If so, how will they square their energy position with the G-7 aspirations for more growth?
Behind the antifossil fuel inclinations manifest at the Earth Summit are two misconceptions, one specific and one general, that hold way too much sway in current official thinking. The specific misconception is the assumed connection between fossil fuel use and global warming. Science provides growing reason to doubt that a buildup of carbon dioxide in the atmosphere caused a measured temperature increase in the last century. It provides further reason to doubt that, if the CO2 buildup does ultimately contribute to planetary warming, natural processes won't offset the change.
The general misconception is the notion that any decrease in energy consumption is good, no matter how it comes about. Why should this be so? To reduce energy consumption without diminishing economic activity is certainly good because it reflects efficiency. But lower energy use for its own sake is something different.
By definition, energy is the ability to perform work. Economic growth, because it involves work, implies energy consumption. Economies using energy efficiently to begin with--those in which market forces set energy prices--must shrink or surrender some degree of growth when governments force them to reduce energy consumption in absolute terms. Energy reduction mandates constitute, by definition, orders to perform less work, which means less economic activity and fewer people with jobs. Mandates to use fuels other than the most efficient available have the same effect.
THE TAX GAMBIT
To reduce energy consumption, governments usually raise energy taxes. Energy use declines because the added cost of the tax snuffs some measure of economic activity. When governments tax environmentally disfavored fuels--such as coal, oil, and gas--in order to promote consumption of more-expensive alternatives, the same things happen: less energy use, less work performed, less economic activity. The lower energy consumption figures might make environmentalists and government planners happy, but they afford small consolation to workers without jobs.
G-7 leaders deserve applause for saluting job creation and growth. They must not sabotage these righteous intentions by dictating fuel choices for faulty environmental reasons. Contrary to environmentalist mythology, people can work, they can use energy, without destroying nature. Governments simply need to let it happen.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
