Doubtless Beijing, Riyadh and Moscow are pleased as the new U.S. administration mounts a whole-of-government approach to energy policies to “combat climate change.” Yet there are unintended consequences of a premature rush to replace hydrocarbons with renewable energy. Consider:
- Lowering U.S. production and exports of oil and natural gas will worsen the balance of trade; oil imports will rise because alternatives can’t grow fast enough to offset oil’s 95% share of transportation. (EVs are 0.5% of road vehicles today.)
- Accelerating wind and solar installations (which today supply just 4% of America’s energy) will balloon other imports; 90% of solar panels and 80% of key wind turbine components are imported; China supplies most of the world’s solar panels.
- Subsidizing batteries for cars and grids will stimulate yet more imports, for “energy minerals,” essentially all of which are mined and refined overseas.
OPEC and Russia will enjoy restored dominance in global oil/gas markets, and China will expand its overwhelming dominance in “energy minerals” and batteries. Perhaps the whole-of-government approach will include policies to incentivize U.S. mining and processing of energy minerals. It should. Meanwhile, as the new United Nations Production Gap Report makes clear, the world will use more oil and gas in the usefully foreseeable future. That reality has consequences that, thus far, appear absent from the administration’s plans.
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Mark P. Mills is a senior fellow at the Manhattan Institute and author of several reports including Mines, Minerals, and "Green" Energy: A Reality Check and The "New Energy Economy": An Exercise in Magical Thinking. For a review of his policy recommendations for the new administration, visit the memo he contributed to the Manhattan Institute's Transition 2021 series.