“The private sector will never do the amount of fundamental research that society’s interests require because you cannot tell in advance the nature of fundamental research…. The companies can’t tell whether there’ll ever be any return.”
– John Holdren, December 2017 Interview.
Less than one year ago, John Holdren, Obama’s beginning-to-end science adviser, and now Professor of Environmental Policy at the Kennedy School of Government at Harvard University, spoke of his concerns about Trump energy policy in a Climate One podcast from San Francisco.
Holdren quotations are below in red, followed by my rebuttal comments indented in black (subtitles added):
Government R&D as Savior
Holdren: “Well I think the biggest damage that the Trump administration is doing is first of all reducing or proposing to reduce very drastically investments in clean and efficient energy research and development by the government. In this country for a very long time we’ve had a symbiosis between government investments in basic and early-stage applied research and the private sector picking up the best ideas and taking them to scale.
Couple of colleagues of mine recently wrote an op-ed in the Wall Street Journal called the Miracle Machine. And the Miracle Machine is this symbiosis which has over the last 70 years been the principal driver of economic growth. It’s been the principal improver of lifespan, extender of lifespan. It’s been a huge contribution to improving quality of life.
And the Trump administration basically wants to cut off this Miracle Machine at the knees. And the proposition is the government doesn’t need to fund R&D, private sector will do everything that’s required. We know for very fundamental reasons that’s not true. The private sector will never do the amount of fundamental research that society’s interests require because you cannot tell in advance the nature of fundamental research. You cannot tell in advance which research is going to lead to a breakthrough that’s going to improve quality of life. The companies can’t tell whether there’ll ever be any return. How far away the economic return might be, they can’t tell whether the results will be appropriable that is that the company that invest the money will get the economic benefit 20 or 30 years down the road.
And so they just don’t do it and they won’t do it. They can’t defend it to their stockholders. And again what we’ve relied on is the government to do that high risk long return high uncertainty stuff, which as a portfolio we know looking back historically has had enormous benefits, even though you couldn’t predict at the time the research was funded what it would do.
So the Trump administration has proposed to cut U.S. federal investments in energy research and development by 50% in the space of a year. At the end of the Obama administration, Obama led a 20-nation coalition called “Mission Innovation” where these 20 governments the biggest funders of government energy R&D in the world committed themselves to double their investments in clean energy R&D over five years and now Trump wants to cut it in half in one year. This will be if Congress accepts this which we must very much hope Congress does not.”
Rebuttal: Holdren claims that government R&D is the visible hand that corrects the market failure of insufficient innovation. The history of innovation would show that government breakthroughs are the exception and not the rule.
Even shale-gas fractionation, attributed to the US Department of Energy subsidies helping George Mitchell, is quite a stretch. Fractionation in the private sector goes all the way back to the 1860s, explains Michael Giberson, and horizontal drilling (a precursor to fracting) goes back to the 1920s. (Another useful prehistory is here.)
Does anyone want to say that if DOE had not sped up the process that gas fractionation would be unknown to history today? Professor Giberson postulates that without the heavy hand of government on the oil and gas industry (remember price controls?) that it might have been sooner than even with the DOE push:
“Of course, possibly the whole of the federal government’s involvement in the industry – tax policies, regulatory policies, antitrust policies, federal lands policy, and so on – could reasonably be counted as delaying technological advancement when compared against what would have happened under some more rational regime.”
And certainly on the oil side, EOG Resources successful extension of fractionation to crude oil (from natural gas) was a private-sector triumph. ( “There was nothing lucky about EOG’s determination, says Tim Parker, manager of T. Rowe Price’s New Era Fund and a longtime EOG shareholder. ‘EOG is an engineering-driven company, and its great gift is identifying these plays early,’ says Parker.”)
Finally, the philanthropic institutions of civil society can do what both government and profit/loss enterprise cannot do or will not do. What if the Progressive foundations lobbying for climate alarm and forced energy transformation had to put their money where their mouths are? And even here, might their philanthropy be better spent on here-and-now problems rather than speculative ones?
Paris Climate Accord Withdrawal
John Holdren: The second big thing that is very damaging is in connection with the withdrawal from the Paris Accord which President Trump announced. There are couples of things that have happened immediately. We can’t officially withdraw until ironically enough, the day after Election Day in 2020. But Trump has already cut off U.S. support for climate change mitigation and adaptation in developing countries to which we were committed as part of the bargain in the Paris Accord.
The proposition is that the bulk of the accumulation of climate altering greenhouse gases in the atmosphere has been caused by the industrial nations and the developing countries are nonetheless the most at risk because they have the least infrastructure the least capacity to adapt and to absorb the impacts of climate change.
And so the bargain was that the industrialized countries would contribute increasingly to the costs of climate change mitigation and adaptation in the developing countries reaching $100 billion a year by 2020 and maintaining that level at least until 2025. Trump has already cut off the early U.S. contributions to that rising collective contribution to helping developing countries in need to address climate change that is devastating. And along with it, Trump has sacrificed U.S. leadership in this space.
In November 2014 President Obama and President Xi of China stood up together in Beijing and said we’re the two biggest economies, we’re the two biggest emitters. We recognize climate change as one of the surpassing challenges of the 21st century. Our two countries are ready to lead together in addressing this problem. That joint statement that condominium on climate policy between the United States and China certified those two countries, our country and China as the global leaders of a sensible effective response to global climate change. It made the Paris Accord possible.
Without Obama and Xi standing up and saying that we would never have had Indonesia or Brazil, India, Mexico coming along and joining in what became 195-nation set of commitments to seriously address climate change.
Rebuttal: The Paris climate accord was exposed and rejected by climate scientist/activist James Hansen as “a fraud really, a fake.” He added:
“It’s just bullshit for them to say: ‘We’ll have a 2C warming target and then try to do a little better every five years.’ It’s just worthless words. There is no action, just promises. As long as fossil fuels appear to be the cheapest fuels out there, they will be continued to be burned.”
And as rightly explained by the Trump Administration in pulling out of Paris, the international accord was more about global wealth redistribution than about appreciable reversals in the alleged human influence on global climate. Regarding the targets set by signatories to the Paris accord, the results to date have been dismal.
On moral grounds, as argued by Ted Nordhaus of the Breakthrough Institute in Foreign Affairs: “We need to stop trying to balance the increasingly parsimonious carbon emissions budgets [of international climate agreements] on the backs of the global poor.” He concluded:
“There is no moral justification for denying those populations the benefits of fossil-fuel-driven development. Lower-emissions levels associated with curtailed development will not provide any meaningful amelioration of climate extremes for many decades to come, whereas the benefits that come with development will make those populations substantially more resilient to climate extremes right now.”
China as Energy Leader
John Holdren: We’ve now left China standing alone as a global leader on climate change. You have to ask yourself, is that a great idea? China is positioning itself to lead in all kinds of domains globally…. By cutting back our research and development we’re sacrificing our leadership in clean energy innovation and ultimately will damage our economy because there is a $25 or $30 trillion market in clean energy over the next 20 or 25 years worldwide. And who’s going to get that market?
Rebuttal: As I explained in my post “No, China will not Outsmart America’s Energy Renaissance:”
“Imagine a centrally planned economy out-thinking and out-performing a consumer-driven, free-market one…. The poverty of central planning starts with the knowledge problem and ends with public-choice issues of politics polluting the ‘ideal’ plan. Thus, [one] not only has to prove a market failure from decentralized decision-making but also address the probability of government failure in any solution to the alleged problem.”
China as the “global leader on climate change”? Check out this country’s coal boom. “Building work has restarted at hundreds of Chinese coal-fired power stations, according to an analysis of satellite imagery,” reports Matt McGrath of BBC News (September 2018). He continues:
“The research, carried out by green campaigners CoalSwarm, suggests that 259 gigawatts of new capacity are under development in China. The authors say this is the same capacity to produce electricity as the entire US coal fleet. The study says government attempts to cancel many plants have failed.”
CoalSwarm reports (September 20, 2018):
“259 Gigawatts (GW) of new capacity are under development in China, comparable to the entire U.S. coal fleet (266 GW). This represents a 25% increase in China’s coal power fleet. The new capacity is the result of a permitting surge from late 2014 to early 2016, after a regulatory devolution from central to provincial authorities. Contrary to previous reporting and analysis, many of the restrictions only delayed new projects rather than stopping them.”
China may talk a good game by wasting big money on (fake) green energy, but expect this country’s CO2 emissions to keep on rising in the years and even decades ahead. (Same for India, by the way.)
In all, King Coal is alive and well globally. An IER study found:
“Globally, coal still generates more electricity than any other source. In 2017, coal generated 38 percent of the world’s electricity—64 percent more than natural gas, which ranked second in electricity generation worldwide. Coal’s share in 2017 was no smaller than its share two decades earlier.”