Mark P. Mills When Politics and Physics Collide The belief that mandates and massive subsidies can summon a world without fossil fuels is magical thinking.
https://www.city-journal.org/article/the-magical-thinking-behind-the-energy-transition
The idea that the United States can quickly “transition” away from hydrocarbons—the energy sources primarily used today—to a future dominated by so-called green technologies has become one of the central political divides of our time. For progressive politicians here and in Europe, the “energy transition” has achieved totemic status. But it is fundamentally a claim that depends on assessing the future of technology.
While policies can favor one class of technology over another, neither political rhetoric nor financial largesse can make the impossible possible. Start with some basics. It’s not just that currently over 80 percent of our energy needs are met directly by burning oil, natural gas, and coal—a share that has declined by only a few percentage points over the past several decades; the key fact is that 100 percent of everything in civilized society, including the favored “green energy” machines themselves, depends on using hydrocarbons somewhere in the supply chains and systems. The scale of today’s green policy interventions is unprecedented, targeting the fuels that anchor the affordability and availability of everything.
In the U.S., the energy-transition policies center around the 2022 Inflation Reduction Act, the most ambitious industrial legislation since World War II. Both critics and enthusiasts note that the budget figure advertised when the legislation was passed—$369 billion—isn’t close to the real cost. A comprehensive Wood MacKenzie analysis shows that the Green New Deal’s price tag is closer to $3 trillion.
And that’s not all. Through regulatory fiat, the Environmental Protection Agency’s newly announced rules effectively mandate that more than half of all cars and trucks sold must be electric vehicles (EVs) by 2032. That will demand, and soon, the complete restructuring of the $100 billion U.S. automobile industry. At the same time, an EV-dominated future will also require hundreds of billions more dollars in utility-sector spending to expand the electric distribution system to fuel EVs. Added to that, among other similar administrative diktats, the Securities and Exchange Commission’s newly released “climate” disclosure rules (temporarily on hold) are intended to induce investors to direct billions of dollars toward energy-transition technologies. This rule will entail tens of billions annually just in compliance costs, never mind the shifts to investments it will create.
The total direct and induced spending on the energy transition could easily exceed $5 trillion before a decade passes, or sooner, if advocates prevail. For context, the entirety of World War II cost the U.S. roughly $4 trillion (in today’s dollars). More relevant in terms of domestic scope, building the entire U.S. interstate highway system cost just $600 billion (also inflation-adjusted).
The transition spending that’s coming will add up to far more money than the amount printed for economic “rescue” during the Covid lockdowns. Since all the Inflation Reduction Act, and related, spending has yet to flow through the economy, it bears asking why economists aren’t alarmed about reigniting inflation. Perhaps, behind closed doors, the Federal Reserve is worried.
It’s obvious that the motivation underlying this largesse is a kind of mania to “decarbonize” everything. However, one’s beliefs or predictions about climate have no bearing whatsoever on the features and costs of energy technologies, whether solar panels or lithium batteries; nor do they bear on realities such as the sources of the copper wires and other hardware needed to expand the grid. A growing number of analysts, both within and outside government, worry about the underlying realities that expose the hard limits to executing the “transition.”
Delivering reliable 24–7 electricity using episodic power sources (wind and solar) unavoidably necessitates both over-building (to supply extra energy) and some kind of energy-storage system. The combination of these two requirements leads to a doubling or tripling of delivered energy costs compared with the “spontaneous” cost of one machine operating.
Building wind and solar machines, along with the batteries needed, also requires a far greater quantity of metals and rare minerals—so-called energy minerals—than is associated with hydrocarbons to deliver the same amount of energy. A seminal paper from the International Energy Agency (IEA) estimated a fourfold to 40-fold increase in global mining would be needed for a variety of common energy minerals. A more recent paper from Yale looked at a suite of 15 rare minerals required for “full decarbonization” and reached similar conclusions: the supply of various key “rare earth” elements would have to increase 60- to 300-fold. A Platts analysis of copper—the pillar of electrification and green tech, and essential for much else—found that, if transition plans proceed, the world would be, within a few years, short of copper, and that shortage would expand to levels in the tens of megatons within the decade. Such unprecedented increases in demand must be considered in light of the well-established history of ten-to-15-year lead times to find, and bring online, new mines.
The relevance of mining, in particular, is highlighted by how minerals themselves now constitute more than half the cost of building solar modules and lithium batteries. That means that the future costs of such hardware are firmly in the hands of global miners and minerals refiners. Ambitions to break China’s supremacy in supplying those refined energy minerals and components face challenges beyond time and money, not least policymakers’ unwillingness to reform industrial regulations.
Meantime, economists and regulatory lawyers fuel the fantasies of the transitionists by suggesting that markets can be manipulated to yield their desired outcomes. There is some truth to that, but manipulating parts of markets, and specific products, is entirely different than trying to do the same for the entirety of society, which is the transitionists’ ambition. The idea that this can be done at all, much less painlessly, redefines the word naïve.
But these challenges and materials shortfalls will, the economic theorists propose, induce more innovation. They imagine the “market” will rapidly produce new and better technologies that conquer lithium batteries’ aversion to cold, the limits of photovoltaic efficiencies, or the staggering energy-intensity of fabricating solar silicon, which requires about 100 times more energy per pound than steel. The last fact matters because of China’s 90 percent market share in producing solar silicon on its coal-fired grids. It is no exaggeration to say that the realities of solar silicon fabrication mean that solar subsidies and mandates have induced eager Californians to festoon their roofs with transmuted coal.
But there are real-world limits to the velocity of commercialization of all industrial-class technologies, and firm physics boundaries for all hardware. The limitations of economic theory become apparent at the scale of civilizational engineering, and economic incentives cannot alter physical laws that govern technology. Crucially, it’s a practical fact that the technologies available today are those that will be deployed in the coming decade, not speculative future inventions. And subsidizing today’s technologies tends to lock in the use of yesterday’s innovations. The transitionists who dismiss those who make such observations as “climate solutions deniers” have recently adopted a new tactic: labeling such perspective as “techno-pessimism.”
Given the magnitude of money at stake, and the centrality of energy, it’s rarely been so important to recognize the difference between pessimism/optimism and realism. There is much to be optimistic, even excited, about regarding the emergence of new technologies. But the overwhelming majority of innovations throughout history have been with energy-using, not energy-producing, technologies. Put differently: humanity’s imagination is far more fecund when it comes to finding ways to consume energy than to produce it. That’s one of those ineluctable realities of the universe. The options for producing energy are surprisingly limited, and new possibilities await the arrival of new physics. That arrival is certainly imaginable, indeed almost inevitable, but also irrelevant for the purposes of what we can build in the next decade or two.
The transitionists, however, hold it as axiomatic that the world is witnessing a foundational tech revolution within energy domains—hence their hyperbole about “exponential progress” and terms like clean tech, energy tech, or climate tech, meant to invoke the exponential growth in computing and communications. In that worldview, the hyper-spending is a way to accelerate the inevitable emergence of the “new energy technologies” (the preferred term in China). Silicon Valley’s seemingly rapid production of other game-changing technologies (all energy-using) and globe-straddling companies have yielded an article of faith that, when enough money goes to enough smart people, amazing innovations will happen. The IMF economists phrased it thus in a report enthusing about an energy transition: “Smartphone substitution seemed no more imminent in the early 2000s than large-scale energy substitution seems today.” The transitionists use many variations of that analogy, but it is a category error on two counts.
First, the physics of energy-producing machines are profoundly different than those of energy-using information tech. If silicon-based photovoltaics could scale the same way silicon-based computing can, then we should soon expect to see a solar panel the size of a postage-stamp, costing a dime, capable of powering the Empire State Building. Similarly, if battery “tech” scaled like computer tech, we would soon see a shoebox-sized battery, costing next to nothing, that could power a jumbo jet.
The point is not only that such outcomes are impossible, with the physics we know, but that invoking computer-tech growth patterns outside of computing itself is silly. The same is true of non-green-energy machines. Combustion engines have plenty of room for efficiency gains—indeed, far more room for improvement than green-energy hardware—but they can’t improve at exponential rates. Otherwise, we could one day expect to see ant-sized car engines capable of generating 1,000 horsepower.
There’s another category error in analogizing energy tech to computer tech. Consider the IMF’s musings on smartphone substitution and energy substitution. Unshackling the personal phone from wired connections didn’t doom wires and cables for communications—instead, it created an enormous expansion in communications traffic that, collaterally, drove greater need for wires and cables. Analogously, it is more likely that the use of lithium batteries, rather than eliminating the use of internal combustion engines, will engender greater use of them (for example, in hybrids, and not just for cars but also for aircraft and other machines).
In general, the transitionists’ tropes contain a fundamental forecasting error: failure to recognize differences in the inherent utility of different classes of (energy-producing) technologies, and thus their longevity. The transitionists’ favorite metaphor—horses replaced by cars—is the exception rather than the rule for many technology domains. Airplanes didn’t eliminate seagoing ships; both expanded into different primary utility functions.
The simplistic notion embedded in the central animating vision of the energy transition is the claim that fossil fuels are “old tech” that is about to be replaced, wholesale, by modern “energy tech.” Some things aren’t easily, or ever, replaced but instead find either narrowing utility (as a share of an economy or market) or continue without diminution because of improvements over time. Examples include the wheel, cabling, wires, roads—or, in the materials domains, glass, steel, concrete, and even stone for buildings.
History shows only a few examples of “old” sources of energy being abandoned. The world transitioned entirely away from whale oil for illumination around 1850, and societies transition away from burning dung whenever possible (though it’s still widely practiced in poor countries). For everything else—from water wheels to burning coal and even wood—there are no “transitions.”
Global wood-burning still supplies more than twice the energy of all solar and wind installations combined. Even in the U.S., more wood is burned for fuel today than in 1824. The “transition” has been in the collapse in the share of energy that wood supplies. Thus, it is vexing for the decarbonizing camp that global consumption of coal is rising, which alone puts the lie to the technological trope that wind/solar is inherently cheaper. If that were true, the markets would need no inducements to abandon coal. Instead, globally, both coal and wind/solar are expanding because they have different utility functions. They are expanding in those markets where demand is booming and where supply choices are unfettered.
Perhaps the most damaging claim of the transitionists is that mandates and massive subsidies can induce markets to respond with truly radical innovations. Yes, higher taxes, rules, and regulations cause market players to react by finding creative ways to circumvent them. But foundational innovations—the game-changers—don’t emerge from governments imposing high costs and limits on behaviors. This reality is starkly evident with the deep naivete about mining and minerals supplies, or with the carbon tax offered as an “efficient” way to induce alternatives to hydrocarbons. The effect of a carbon tax is simply to make all things more expensive because all things use hydrocarbons.
If policymakers continue to pursue taxes, subsidies, and mandates for the purpose of avoiding hydrocarbons, markets will indeed react—but the market’s responses to higher prices and lower availability will be, in the main, deprivations. These are realities, not exhibitions of pessimism. Valid reasons exist to be optimistic that superior, and even radically different, energy technologies will eventually emerge. The realism relates to when these things will arrive. Timing matters, and it’s a long process from foundational discoveries to widespread commercialization. One iconic example of real-world velocities is the time it took to make the lithium battery sufficiently useful to render electric cars viable for tens of millions of people: from foundational innovation to the first Tesla was three decades. The same pattern is visible across the energy landscape.
We’ve witnessed amazing technological transformations over the past half-century when sufficient money was deployed to design and build machines, whether for warfighting, highways, or space travel. As Elon Musk recently said, “I think technology is the closest thing to magic that we have in the real world.” Musk doubtless knew he was reframing a maxim coined a half-century ago by the science fiction writer Arthur C. Clarke: “Any sufficiently advanced technology is indistinguishable from magic.”
But rockets, including those of SpaceX, fly using hydrocarbons. EVs get built using diesel fuel. Solar cells are fabricated using coal. Neodymium magnets for wind turbines are acquired and processed by using coal, oil, and natural gas. Industries consume natural gas to fabricate the myriad polymers and metals needed for society, as well as the fertilizers that help feed the world.
If you want a nontechnical guess at what the future holds, consider the question as viewed through the lens of finance, not physics. Larry Fink, CEO of investment behemoth BlackRock, a person and firm widely associated with “transition” enthusiasm, recently published an annual letter where he observed, after visiting 17 countries, that “leaders believe that the world still needs both . . . renewables and oil and gas.” As for BlackRock’s bet on that future, Fink notes that his firm has more than $500 billion invested in energy firms on behalf of clients, 75 percent of which is with traditional, not “green,” energy. That doesn’t sound much like a “transition,” does it?
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