daniel raimi and alan krupnick, are senior research associate and senior fellow respectively at the environmental think-tank, Resources for the Future. This article is based on the authors’ post on RFF’s blog.
Published May 7, 2018
New York Times columnist (and Nobel-winning economist) Paul Krugman recently concluded that the costs of renewable energy — wind in particular — have fallen so dramatically that “there is no longer any reason to believe that it would be hard to drastically ‘decarbonize’ the economy. Indeed, there is no reason to believe that doing so would impose any significant economic cost.”
While we share his enthusiasm for wind, solar, energy storage and other low- or zero-carbon technologies that can serve to reduce fossil fuel use, Krugman left readers with the impression that decarbonization would be cheap and easy, were it not for entrenched fossil fuel interests impeding government efforts to reduce emissions. We disagree.
The costs of renewable energy technologies are, indeed, falling. And it’s certainly true that some in Washington, not least the Trump administration, have worked to hobble the forces driving a reduction in greenhouse gas emissions. But quite apart from the opposition of fossil fuel interests, there are still numerous barriers to rapid decarbonization.
Count the Ways
For starters, the energy system that underpins the $20 trillion American economy is enormous, and it changes slowly even when spurred by powerful incentives. Fossil fuels still provide 80 percent of the primary energy in the United States. And while wind and solar have grown rapidly in recent years, together they account for just 2 percent of the U.S. energy supply. Even if they expand at breakneck pace, the sheer scale and long life of our energy infrastructure means that the most rapid conceivable transition would take many decades.
Second, the growth in renewables we’ve seen to date has been heavily supported by government subsidies. It’s true that the real costs of renewables have been falling fast. But in many parts of the United States, fossil fuels continue to offer the lowest cost option for electricity generation. Indeed, the shale revolution will likely provide a competitive low-cost supply of natural gas for many years.
Moreover, wind and solar hardly come free of environmental concerns of their own. The amount of land that wind and solar installations would need to displace fossil fuels in electricity generation is substantial. According to MIT’s Future of Solar Energy study, solar installations to meet one-third of the United States’ electricity demand in 2050 would require 4,000 to 11,000 square kilometers (for context, Massachusetts covers 27,000 square kilometers).
Wind farms take more land to generate the equivalent power—66,000 square kilometers, though only a small portion of that land need be exclusively devoted to energy production. (TheEnergyCollective, a curated online forum on energy and climate analysis, offers an insightful discussion of this topic.) Even relatively modest (from a national perspective) proposals, such as Texas’ plan to build 14 to 28 gigawatts of new solar installations by 2030, spawn concerns about the environmental impact — notably, habitat fragmentation and risks to endangered species.
Krugman also neglects to account for the role of nuclear power, which generates about 20 percent of the electricity used in the United States. Most nuclear plants are decades old, with many retirements on the horizon and few replacements planned. The more that are retired, the more other sources will have to fill in, upping CO₂ emissions or creating a greater burden on renewables.
Keep in mind, too, that decarbonization isn’t just about electricity. Achieving steep cuts in greenhouse gas emissions will require large reductions from transportation, industry and building heating that collectively accounted for 62 percent of US primary energy consumption in 2017. While some of these energy services can be electrified — think electric vehicles and electric home heating — wind and solar can’t replace fossil fuels in others (notably air travel) in the time frame needed to meet climate goals. And despite years of subsidies, the percentage of electric vehicles in the fleet remains miniscule.
Indeed, global consumption of petroleum products is galloping ahead. This year alone, demand for oil is set to grow by about 1.5 million barrels per day. This growth isn’t driven by lobbyists on Capitol Hill, but by strong global economic growth spurred by developing countries in Asia.
A massive shift in the energy system would have political and social consequences that are sure to yield more pushback than climate advocates have faced to date.
Winners and Losers
Setting aside the technological hurdles, it is important to remember that any policy reducing GHG emissions will generate winners and losers. While the aggregate economic impact of decarbonization may be relatively small as a portion of GDP (as Krugman argues and as RFF researchers confirm), such a massive shift in the energy system would have political and social consequences that are sure to yield more pushback than climate advocates have faced to date.
First, lower-income households will bear the largest relative burdens of the higher energy costs that are likely as a result of aggressive efforts to reduce GHG emissions. While there are certainly ways of offsetting these unequal impacts — funds raised from a carbon tax, for example, could be used to cut regressive payroll taxes — the process is bound to be messy in political terms.
Second, consider the effects on Appalachian coal mining, where a chronically depressed region is struggling to cope with the nationwide transition away from coal-fired electricity generation. Now apply a similar logic to the hundreds of communities around the country that are heavily reliant on oil and gas extraction as their economic base. Cities like Midland, Texas and Williston, North Dakota (two major beneficiaries of the shale boom) would face fundamental challenges in a world of low or no demand for fossil fuels. It’s no wonder that politicians representing these regions fight to preserve the engine driving their prosperity.
Providing assistance to the individuals and communities negatively affected by climate policies has been an important component of past legislative efforts. But the struggle to decarbonize the economy would present an order of magnitude greater challenge in protecting the losers.
What to Do
Policies that defend energy-production-as-usual are far from the only impediment to achieving long-term climate goals. Hence the imperative to get serious about both speeding the development of zero-emission technologies and removing institutional impediments to a low-GHG future.
Entrepreneurs are already working on a variety of technologies with large-scale potential. These include new nuclear advancesthat could provide reliable electricity from new plants while also substantially reducing the risks of operating older-generation light-water reactors. The technologies also include carbon capture, utilization and sequestration (CCUS), which has the potential to reduce GHG emissions at the fossil fuel smokestack. They include carbon dioxide removal (CDR), by which CO₂ is directly removed from the atmosphere and stored securely. And they include ever-greater energy storage density at lower cost, making both electric cars and intermittent renewable sources buffered by battery power more attractive.
And, yes, the pathway to a low-GHG future absolutely includes continued investment in renewables technology. Solar power, in particular, offers enormous potential to provide electricity and also, perhaps, to synthesize liquid fuels to replace oil.
To smooth the path, policymakers could provide a variety of incentives. Subsidies to renewables and other technologies have been the instrument of choice in the United States in recent years. A more efficient strategy would be to put a price on greenhouse gas emissions — either a tax reflecting the social cost or a cap-and-trade system that gradually ratchets down total permitted emissions — and, possibly, subsidize stages of the development process that resist market-based incentives. Such an approach could provide a (hopefully reliable) roadmap for the investors of today, while laying the groundwork for the future technologies we can only dream about.
In sum, we see the path forward, but it will require overcoming numerous complex and daunting challenges. While Krugman may see the problem of decarbonization as one of “Earth, Wind and Liars,” we would update the musical reference to quote the contemporary artist D’Angelo: “It Ain’t That Easy.”