In August, the Department of Energy released a surprising announcement buried within an obscure technical report. It revealed that U.S. global warming inducing CO2 emissions fell to a 20-year low, nearly consistent with targets mandated by the virtually defunct and ballyhooed Kyoto Protocol signed in 1997.
However, this herculean feat was not accomplished by politicians promising to slow the rise of the oceans or any super-national United Nations overseers. Instead, this dramatic turnaround was fostered by market forces that favored newer and cleaner sources of energy, independent of government coercion.
What is this mysterious domestic energy source that is creating thousands of new jobs, lowering CO2 emission levels by decades, and facilitating falling energy prices? It is the emerging unexpected potential of shale natural gas.
Estimates of recoverable natural gas reserves have skyrocketed as new extraction techniques, known as hydraulic fracturing, or fracking, have unleashed the untapped potential of hundreds of trillions of cubic feet of clean energy.
Unfortunately, this clean and low carbon energy source has come under vitriolic attack from environmentalists, the Environmental Protection Agency (EPA) and other self-appointed guardians of Mother Earth. These critics seem to be stuck in an unfortunate predicament; their goal of atmospheric carbon reduction—which floundered during decades of political and bureaucratic morass of cap-and-trade and other tax schemes—was accomplished in a few short years, bereft of government meddling. This unforeseen development stole the EPA’s sought-after victory and deprived them of a useful political cudgel after consumer-driven market forces facilitated the switch to the cleaner and cheaper energy source.
Capitalism begets wealth, and wealth begets a cleaner environment.
After all, the world’s greatest environmental disasters occurred in the impoverished former Soviet bloc (deprived of notions of private property) and (officially) communist China is infamous for its pea-soup smog. Even today, the poorest third world countries are often the most buried in trash and fouled with noxious air.
For those politicking central planners who profess an understanding of this nation’s economy, a different solution promises to score political points. Instead of applauding falling levels of CO2 by encouraging domestic fracking, they propose a new set of state measures. First, pour billions into companies like Solyndra, A123, Fisker and other so-called green champions who possess the right political connections and know how to profit from politicians’ passion for green crusading.
Second, regulate and tax competing domestic energy sources in order to make them less competitive over their politically favored usurpers. Of course, this allocation of finite resources is politically motivated, and misallocated to less productive enterprises that are unable to meet consumer demand without subsidies.
After this contentious election there is even new talk of a renewed push for a carbon tax scheme, ostensibly to penalize carbon emitters and promote the targets contained within the Kyoto Protocol. However, these targets were already met by natural market forces, and talk of a carbon tax is a thin smoke screen for tax hikes which will undermine this nation’s fragile economic environment.
Further, impeding the development of natural gas paradoxically will stunt the holy grail of the modern environmental movement—lowering carbon emissions. Thus, these green advocates are mired at a crossroads and conflicted between two opposing goals.
The lesson derived from the explosive growth of natural gas is this: The economy is not a predictable machine that can be manipulated with political objectives in mind, but instead a chaotic sum of 300 million Americans’ actions (or inactions).
Actions often beget completely unforecasted reactions, and few economic variables are understood by fallible and gullible minds. Attempted engineering rarely results in delivering expected outcomes, but instead within every attempt of economic or social engineering there lay both seen and unseen consequences. Each entails magnified repercussions often not understood, even in retrospect.
Thus when it comes to emerging economic processes such as the development of new energy sources, expect the unexpected in the marketplace, but be skeptical of statistical scheming.