Climate Politics Hurts The Environment and America
An irrational focus on climate politics is creating bad policies
On Friday January 26th, President Biden announced a “Temporary Pause on Pending Approvals of Liquefied Natural Gas Exports.” The timing of the announcement, a mere days after the New Hampshire primaries and Biden’s abortion rights campaign rally, points to an underlying political motivation for the White House statement. The opening lines of the statement also makes this clear: “President Biden has been clear that climate change is the existential threat of our time—and we must act with the urgency it demands to protect the future for generations to come. That’s why, since Day One, President Biden has led and delivered on the most ambitious climate agenda in history…”
The document, which reads like a campaign flyer, touts the Biden Administration’s top climate accomplishments, which include the signing into law of the Inflation Reduction Act, the pursuit of an environmental justice agenda, the cancellation of oil and gas leases while also accelerating permits of clean energy projects, restricting emissions from power plants, and establishing a target that 50% of new cars sold in 2030 will emit zero emissions.
In aggregate, Biden’s climate actions are seeking to deter the development of cheap, reliable, and dependable energy sources while they promote and subsidize supposedly “clean” energy production projects. Let’s consider the goal moving America towards electric vehicles, with a stated target that 50% of vehicles sold in the United States in 2030 would produce zero emissions. Or what about the Inflation Reduction Act’s subsidies for electric vehicles that began in 2022? How will these policies drive different behavior in America and the world and will they ultimately help the environment?
Rather than point to generic statistics, I’m going to use a specific, personal example. In late 2022, I decided to trade in my Jeep Grand Cherokee. At the time, the dealership offered me around $33,000 for the car, which I happily accepted as it was above my expectations and the Kelly Blue Book value — a sign of the then robust used car market. The salesperson I worked with knew that I liked Wranglers and suggested I consider the new 4xe hybrid electric one. I immediately declined, saying that I preferred cars with a gross vehicle weight rating of over 6000 pounds as they qualify for accelerated depreciation, something that I am able to claim as a self-employed sole-proprietor. The Wrangler, I knew from prior consideration, was less than 6000 pounds.
“Actually, Vikram, the 4xe hybrid wranglers are over 6000 pounds because of the extra weight of the batteries, so you’ll qualify!” This meant that the new 4xe Wrangler would cost me less on a tax-adjusted basis than the value of my trade! Wow, that’s a deal, I thought, and started examining the inventory at the dealership. The salesperson then chimed in with another tidbit of news, “And don’t forget that the Inflation Reduction Act will also give you a $7500 tax credit!” At the end of the day, I ended up getting paid five figures for trading in an old car and getting a brand new one. For all American taxpayers reading this piece, thank you! It was your money that the government transferred to me.
But perhaps these transfers are a useful means to save the environment? Did my gasoline bill go down as my car’s efficiency went up? As I analyzed the data, I struggled to find any justification for the government giving me your money to buy this car. It was too hard to gauge the improved fuel efficiency from driving in hybrid mode, but it wasn’t significant: I gained a less than one mile per gallon gain when driving in hybrid mode.
I did, however, find a simple measure of the car’s supposed benefit: the distance I could travel in electric-only mode. My new hybrid Wrangler had a range of around 21 miles (less on cold days) when in electric mode. That is not a typo. Twenty-one miles. On average, I think the range was probably even less, likely 18 miles or so.
Given I didn’t spend the hundreds (thousands?) of dollars to have a fast charger installed in my home, it would take 12-14 hours to charge up the vehicle. My guess (very crude analysis comparing my electricity bill while keeping track of the number of days charging, etc.) suggested it cost me around $4 to fully charge the vehicle each time. (It’s worth noting that New Hampshire has some of the highest electricity prices in the country, so this amount may be different elsewhere in the country.)
So what does this mean? Given that gasoline was under $4/gallon at the time and the vehicle was regularly getting more than 23 miles per gallon, I concluded that I was losing money every time I charged the vehicle. So I stopped, and I began using it as a traditional gasoline vehicle, albeit one that was heavier than it should have been. And in return for having the government pay part of the cost of the car, I had the privilege of driving a vehicle that put extra wear and tear on roads and bridges.
It’s pretty clear to me that my hybrid Jeep Wrangler didn’t make economic sense without government subsidies and probably put an unnecessary burden on New Hampshire’s infrastructure. But it likely also hurt the environment. When we look at the supply chain for batteries, I’m pretty sure that producing the car had a bigger environmental footprint than that of a traditional gasoline car.
And of course, let’s not forget that electric vehicles don’t produce power! Batteries are storage devices. An already overtaxed grid that included natural gas and coal fired power plants was providing the electricity to charge the batteries. Let’s also not forget that extra demand for electricity from electric vehicles would mean (all else equal) higher electricity prices for everyone.
While I’m all for clean air and water and a better environment and healthier earth, I’m absolutely opposed to the inanity of bad policy (labeled “accomplishments” by some) that doesn’t help the environment or the economy and instead is a de facto tax on some and subsidy to others. My Jeep arguably hurt both the environment and the economy when you factor in the battery supply chain footprint, extra infrastructure maintenance costs, and the additional burden on an aging electricity grid.
Given these facts, it’s only logical to ask why such policies gain momentum or ever get written into law. The short answer, I believe, is politics. You see, even though voters consistently place the economy and immigration concerns way above climate change as a motivating issue, the climate may be turning into a “swing” issue. A recent report from the University of Colorado at Boulder suggests that voters focused on climate change may in fact have been instrumental in the 2020 election. A recent Bloomberg opinion piece was even titled “The 2024 Election Just Might Turn on … Climate Change?” and suggested not focusing on the climate would hurt candidates because “it’s also possible that voters are starting to realize climate change has a growing impact on the economy, public health, immigration and more.”
Because climate change is seemingly a far more important issue to Democrats than to Republicans, the LNG Pause Statement may really be about President Biden catering to his core base of supporters. But it also may be about interfering with the normal functioning of energy markets for domestic political gain. On the margin, restricting potential exports of natural gas would leave more natural gas in America, and all else equal, more natural gas in America would equate to lower prices. This would reduce inflation and help consumer budgets going into an election cycle. I doubt, however, that it would help the environment, as I wrote in the below piece:
It’s also important to note climate change is a global phenomenon that has the potential to impact everyone on this planet, even if different regions may feel the impact in different ways or at different times. As such, it’s foolish to merely look through a domestic-only lens to understand climate dynamics. The geopolitics of climate change are also important. It’s also useful to remember, as I’ve written and spoken about for some time, that the United States and China are in the midst of a great power war, even if it hasn’t (yet) turned kinetic.
China has agreed that it will begin reducing its carbon emissions by 2030, meaning for the next six years or so, the Middle Kingdom is likely to rapidly increase its carbon output. In fact, in April 2021, Chinese President Xi Jinping explicitly pledged to “strictly control coal-fired power generation projects.” Since then, however, China has been rapidly increasing its use of coal to power its economy.
According to data from the Global Energy Monitor, China had approved 127 coal plants capable of producing 54 gigawatts of power in the two years prior to Xi’s statement to the Leaders Summit on Climate. In the two years after his pledge, China approved 182 coal plants with aggregate power production capacity of 131 gigawatts. Rather than cutting back on coal, China is rapidly increasing its use. In fact, NPR noted in 2023 that Beijing is building the equivalent of two new coal fired power plants per week, roughly six times the rest of the world combined. Words aside, China’s actions indicate the country has opted to prioritize economics over the environment. The Chinese are doing this at precisely the same time that they claim to be “committed” to leading the global energy transition.
So how does the LNG Export Pause factor into the US-China War? The statement clearly states that the US “remains unwavering in our commitment to supporting our allies around the world…[and the] announcement will not impact our ability to continue supplying LNG to our allies in the near-term.” While promising, the statement seems oblivious to the fact that energy commodities operate in a global market, meaning trade patterns will shift and global energy prices will likely rise.
Yes, America will supply Europe to decrease their dependence on Moscow, but that means Moscow’s production will fill in the gaps where we’ve pulled back. And because less US supplies on global markets will mean higher prices, Moscow will be among the world’s biggest beneficiaries of reduced LNG exports from America. Given Russia’s relationship with China, this is also an indirect “win” for Beijing. Rather than enabling American energy dominance to increase American power and influence in the world, the Biden administration seem to be waving a white flag.
There are also currency implications. As the Chinese-led economic ecosystem seeks an alternative to the US dollar, LNG exports from the US could be way a healthy way to increase demand for the greenback. Why reduce demand for US dollars at a moment when America is well positioned to increase the importance of our currency for global trade? From a currency statecraft perspective, this sure seems like an unforced error, incrementally helping Beijing and others as the world becomes less dependent upon the US dollar.
And let’s not forget that building and maintaining LNG infrastructure in the United States is a major economic engine that will create jobs, drive demand for supporting services, and spur meaningful economic activity up and down the supply chain of natural gas as well as the communities in which facilities are built. And all of that will occur without any government subsidies. All we need to do is have the government get out of the way to unleash American entrepreneurial energy.
An unfortunate reality is that climate politics have become more important that climate policy. My guess is that most people care about the air they breathe, the water they drink, and the planet they live upon. It’s unclear if politicians do. But voters are smart and can see through inane policies that make little sense for the environment or the economy. It’s high time to move beyond climate politics and focus on energy policies that prioritize America’s long term interests in a strong economy, clean environment, and a safer world.
About Vikram
VIKRAM MANSHARAMANI is an entrepreneur, consultant, scholar, neighbor, husband, father, volunteer, and professional generalist who thinks in multiple-dimensions and looks beyond the short-term. Self-taught to think around corners and connect original dots, he spends his time speaking with global leaders in business, government, academia, and journalism. LinkedIn has twice listed him as its #1 Top Voice in Money & Finance, and Worth profiled him as one of the 100 Most Powerful People in Global Finance. Vikram earned a PhD From MIT, has taught at Yale and Harvard, and is the author of two books, Think for Yourself: Restoring Common Sense in an Age of Experts and Artificial Intelligence and Boombustology: Spotting Financial Bubbles Before They Burst. Vikram lives in Lincoln, New Hampshire with his wife and two children, where they can usually be found hiking or skiing.
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