Obama's Energiewende

President Obama has committed the U.S. to a 26% to 28% reduction in carbon emissions from 2005 levels by the year 2025. Is a reduction of that magnitude workable? The German experience with energiewende (“energy transition”) proves that it is not. 

Having already begun its costly phase-out of nuclear power, Germany plans to rely on renewable sources for more than 35% of its needs by 2020 and 80% by 2050. The country is now more dependent on wind and solar to power its large industrial economy than ever. The result has been a colossal disaster.

German customers, both residential and commercial, pay twice what Americans pay for electricity. As higher energy costs filter through the economy, German industry is no longer expanding, consumers are purchasing fewer consumer goods, and job growth is stagnant. This is a recipe for national decline.

Germany’s GDP declined by .6% in the second quarter of 2014. In the third quarter, German GDP increased by just .1%, below that of the EU overall. The real problem is not so much current growth, or lack of it, but future growth as the cost of renewables sinks in. Anticipating this cost, German industry has cut domestic capital investment and shifted jobs overseas. According to a recent report, German capital investment fell by .9% in the third quarter of 2014. Capital investment is among the most reliable indicators of future economic growth. 

The irony is that as Germany and other countries shift to renewable fuels to combat global warming, global temperatures show no sign of warming. Even if they did, Germany’s contribution to warming would be a fraction of one degree over the next century. Germany produces only 2% of global greenhouse gases. With an IPCC consensus of 3 degrees Celsius warming by 2100, and with man-made warming supposedly accounting for 40% of that, Germany’s contribution would be .024 degrees. Given the proven inaccuracy of IPCC forecasts in the past, Germany’s contribution to warming would likely be less than .024 degree or even zero. Is it worth impoverishing a nation, punishing retirees on fixed incomes, and forever dashing the hopes of a generation of young job seekers just to make an ideological point?

Compared to the U.S., which relies on fossil fuels and nuclear for 90% of its electricity needs, Germany derives less than 80% from fossil and nuclear, and it has been rapidly moving away from both (with nuclear to be phased out by 2022). As costs mount, business investment is fleeing Germany.

The recent decline of oil prices, along with sustained low prices for natural gas, makes Germany’s energy transition seem all the more doubtful. Germans pay 35 cents per kilowatt hour of electricity. Why not pay 12 cents, as Americans do?

The price differential between renewables and natural gas is even more compelling. With an import price just under $9 per mBtu, German electricity prices should be closer to 25 cents per kWh. And with the prospect of U.S. gas exports beginning in 2015, the European import price could decline further. A 43% cut in electricity prices, from 35 cents to a potential 20 cents,   would revive growth in the German economy and in the EU as a whole. All that’s necessary is for Germany to abandon the energiewende and embrace clean fuels like natural gas and clean coal as the solution to its energy needs.  

Fortunately, a light bulb seems to have been turned on among German lawmakers, who in June 2014 voted to curb future subsidies for renewables. The plan, which calls for a clawback of up to 40% of subsidies from future clean-energy producers, should slow the conversion to wind and solar, and may eventually rescue the German economy from some of the ruinous cost of renewables.

Yet just as Germany retreats from wind and solar, Obama is committing America to a renewables program that sounds a lot like the failed German experiment. Obama’s climate deal with Chinese Premier Xi calls for a 26 to 28% cut in U.S. carbon emissions from 2005 levels by 2025. What did Obama get in return for this toxic pledge? A promise that China would begin cutting emissions by 2030—but by no more than they are already likely to be cut.

That doesn’t sound like much of a deal. The only thing Obama got in return is a bundle of cash from well-heeled environmental donors. That cash might help the Democratic Party in future elections, but the China deal will harm ordinary American workers for decades to come.

Despite the message of the 2014 election, in which voters overwhelmingly rejected the President’s green energy initiatives, Obama continues his war on fossil fuels. On Nov. 25, conveniently three weeks after the election, the EPA proposed updated ozone standards that would carry an estimated annual cost to the economy of $270 billion. Rather than save that money for taxpayers—nearly $4,000 a year to households, forever—Obama may decide to support EPA in defiance of Congress. I am certain that most Americans would rather have the $4,000, and the opportunities for improving their standard of living, educating their children, and investing for retirement that goes with it. If Democrats think otherwise, why not allow the 2016 election to serve as a national referendum on the issue? As it is, the EPA plans to finalize its rule by December of 2015. Once again, a major deadline conveniently scheduled to defy the will of the American people.  

The costly ozone rule is just part of what it would take to meet Obama’s China pledge of a 28% cut in carbon emissions by 2025. To accomplish that, the U.S. would have to shut down existing coal-fired power plants, make good on unrealistic vehicle fuel standards of 54.5 mph by 2025, and shift most new electricity generation to wind and solar.

Even those drastic actions would not achieve the goal because U.S. population is projected to grow by 8% (from 321 million to 347 million) by 2025. This increase in population means that the per capita cut in emission would have to exceed 28% by 2.24%. Thus, the contribution of wind and solar would have to increase from the current 2% of total US energy production to 30.4% by 2025. Wind and solar energy would have to expand by 1500% between now and 2025. Accompanying infrastructure would have to expand to a similar degree.

Yet total annual investment in renewable energy has increased by only 250% over the past decade. For it to increase by 1500% by 2015 would require 60 times the average annual investment of the past. Barring severe rationing of supplies, the only source of funding sufficient to meet Obama’s China pledge is a tax increase adequate to fund green energy subsidies at 60 times past levels combined with an increase in energy prices equivalent to 60 times what was necessary to expand clean energy sources in the past.

Fortunately, Obama’s China pledge was just that—a commitment that can be revisited by the next president. But unfortunately, it is likely to be followed up by more commitments at the upcoming World Climate Summit in Paris at the end of 2015. The stated objective of this pompous conclave of climate enthusiasts is for legally binding and universal agreements on carbon emissions. It seems likely that Obama will see the Paris summit as an opportunity to secure his legacy with environmental supporters. A commitment to subject American energy policy to the whims of UN bureaucrats might prove tempting.  

All along, Obama’s energy “policy” has been nothing more than obeisance to every left-of-center environmentalist while ignoring America’s future energy needs. Short term, that has helped to win elections by appeasing an important Democratic constituency. But long term it puts the country on the same course that has already proven unworkable in Germany. It’s time for the U.S. to do as Germans have done—reverse course before it’s too late.  

Jeffrey Folks is the author of many books on American politics and culture, including Heartland of the Imagination (2011).