Free Economies Are Clean Without Subsidizing Renewables

COMMENTARY Environment

Free Economies Are Clean Without Subsidizing Renewables

Dec 16, 2022 3 min read
COMMENTARY BY
Diana Furchtgott-Roth

Director, Center for Energy, Climate, and Environment

Diana is director of the Center for Energy, Climate and Environment and the Herbert and Joyce Morgan Fellow.
Private companies are investing $5 billion into fusion energy, another sign that the wealth generated by economic freedom can result in cleaner air. sarayut / Getty Images

Key Takeaways

Countries with more economic freedom and higher GDP have cleaner environments. As income increases, people demand cleaner air and water.

Private companies are investing $5 billion into fusion energy, another sign that the wealth generated by economic freedom can result in cleaner air.

People need to know that free economies lead to clean economies—and the freer the better.

new report issued this week by the environmental research group C3 Solutions provides data to show that countries with more economic freedom and higher GDP have cleaner environments. As income increases, people demand cleaner air and water, and move to places that have a healthier environment.

Entitled Free Economies Are Clean Economics, the report correlates the Index of Economic Freedom, published by the Heritage Foundation (where I work), with the Yale University Environmental Performance Index, showing the cleanliness of the environment, as well as other measures of economic performance.

According to the report, countries such as Burundi, Equatorial New Guinea, and the Democratic Republic of the Congo have low levels of freedom and low environmental standards. Spain, Poland, and Thailand are in the middle tier. Canada and the United Kingdom are described as “Middle High.” Some of the cleanest and richest are Singapore, Australia, Switzerland, and Ireland.

Countries that generate income through the service economy, such as Switzerland with its banking sector, are more likely to be well-off and clean than a country that generates income through energy-intensive manufacturing.

>>> Developing Countries Need Modern Energy, Not Climate Reparations

This is perhaps why countries with ”Mostly Free” economies have, on average, a higher environmental performance score (59.04) than the “Free” (58.56). A free country may choose more industry and fewer services, which could result in more emissions. However, additional GDP could result from the more energy-intensive industrial base.

More evidence buttressing the C3 Solutions report came this week from Lawrence Livermore Labs. Scientists there announced they have achieved a net energy gain with fusion, a technique that could, in coming decades, provide an emissions-free source of energy. Private companies are investing $5 billion into fusion energy, another sign that the wealth generated by economic freedom can result in cleaner air.

There is, however, one problem with the C3 Solutions report: it leaves open the door to subsidize green energy. The authors write, “arguably the most effective way to bend emissions curves is to make the price of cleaner resources and technologies, also known as the green premium, less expensive.”

The report cites “rapidly declining prices for solar panels, cheaper batteries, or an innovative, less polluting new manufacturing process.” These prices, in many cases, have declined due to subsidies.

The question for government policy makers is how to reduce these prices. Modern and developing economies should be seeking a natural decline in prices of energy components due to higher productivity for manufactured goods or increased supply for resources.

But the United States and many other countries are spending billions in green energy subsidies. It's not up to the government “to make” prices less expensive, because subsidies required to lower prices to consumers reduce GDP growth. The report should make clear that richer countries should not subsidize solar and wind and other renewables.

>>> The Growing Importance of Economic Freedom

The Inflation Reduction Act gives renewables tax credits of $270 billion over the next decade, according to the U.S. Treasury Department.

By many calculations, these renewables actually increase global emissions. Seven out of the 10 largest solar panel and wind turbine manufacturers are in China. The Chinese make these products using electricity generated from coal-fired power plants which have a huge carbon footprint. Additional emissions are generated when shipping components to Europe and the United States, and disposing of these panels and turbines when their usefulness is over will create even more emissions.

A lower-cost route to cleaner air is natural gas from the shale revolution (which has already lowered U.S. emissions) and nuclear power, which is mired in regulatory obstacles. Meanwhile, according to the U.S. Department of Energy, renewables accounted for only 5 percent of energy consumption—an amount so small that it has not reduced emissions. Emissions have been reduced from the new technology of shale production.

People need to know that free economies lead to clean economies—and the freer the better.

This piece originally appeared in Forbes https://www.forbes.com/sites/dianafurchtgott-roth/2022/12/15/free-economies-are-clean-without-subsidizing-renewables/?sh=5ff68f6c6756