Press Release

Market forces, not renewable energy, lead to decline in N.C. CO2 emissions

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RALEIGH — North Carolina can thank market trends and technological innovation, not renewable energy, for a drop in carbon dioxide emissions that beats most other states. A new John Locke Foundation Spotlight report highlights that fact.

“North Carolinians do not face a hard choice between lowering CO2 emissions or securing least-cost, reliable electricity,” said report author Jon Sanders, JLF Director of Regulatory Studies. “Nor must state government strike a balance between the two. This supposed tension, used to justify attempts at greater state government interventions in energy policy, does not actually exist.”

CO2 emissions have declined by 14.6 percent in North Carolina since 2000, according to a new Brookings Institution study. “That ranks No. 10 among the 50 U.S. states,” Sanders said.

Sanders scoured the Brookings data. He found that North Carolina’s improvement had much more to do with economic forces than government intervention.

Brookings researchers found that the national economy grew by 30 percent since 2000 while CO2 emissions fell by 10 percent. In North Carolina, the economy grew by 26.3 percent while emissions dropped by 14.6 percent.

“The Brookings report made that result seem almost counterintuitive, as if economic growth and emissions must increase together,” Sanders said. “But the idea that economic growth and emissions are invariably linked without centralized government control to break them apart is not supported by economic consensus.”

Instead, history shows that cleaner air has become a “reliable trend” in freer societies with faster-growing economies, Sanders said. Meanwhile, centralized command-and-control economies tend to see growing pollution.

“Market economies reward innovators who produce more and waste less,” Sanders explained. “This has the unanticipated side benefit of encouraging cleaner production. Centrally controlled economies block this process and lack this entrepreneurial vision.”

Economists have developed a model, the Environmental Kuznets Curve, to describe this process. Developing economies produce greater pollution than the state of nature, but that trend eventually shifts, Sanders said.

“When societal wealth, life expectancies, and productivity reach a certain point, people begin valuing cleaner environments,” he said. “At the same time, technological advances and post-development shifts in industry produce cleaner, more efficient outcomes.”

These positive developments require well-established property rights and protections of market freedom, Sanders said. “Government distortions of the market, through subsidies or purchase mandates, hinder rather than help improvement in environmental quality.”

The Brookings researchers identified market-oriented rather than government-driven reasons for falling CO2 emissions during the 21st century, Sanders said.

“Among the driving factors are technological change, consumer preferences, and a growing service sector within the economy,” he said. “North Carolina’s service sector saw one of the nation’s largest expansions, growing from 63 percent of gross domestic product to 72 percent.”

Another key factor involves the decline in natural gas prices linked to the “fracking revolution,” Sanders said. “The Brookings report credited emissions reductions in North Carolina ‘in large part’ from sourcing 32 percent of its electricity generation from nuclear energy, while also shifting more toward natural gas and away from coal.”

Sanders highlights another important factor from the Brookings report. Renewable energy sources such as wind and solar “have yet to register as broad an impact” as expected, he said.

“Not only did the Brookings report find no strong statistical relationship between states’ emissions reductions and solar and wind’s share of power generation,” Sanders said. “In fact, states with the greatest growth in wind and solar as share of their electricity generation saw carbon emissions rise from 2001 to 2014.”

Brookings researchers suggest renewables “will soon contribute” to emissions reductions, but their report offers no specifics about when that change might take place.

Sanders sees clear implications for North Carolina, where emissions have fallen at a greater rate than in most other states. “Technological innovation in energy sourcing — namely, the fracking revolution’s impact on natural gas prices — is responsible for a large part of the emissions decline,” he said. “Market trends, a growing service sector, and consumer preferences also have contributed.”

“None of these factors is dictated or even foreseeable in the halls of power in Raleigh,” Sanders added. “In fact, states that tried to force the issue by mandating the greatest reliance on renewable energy sources have by and large failed to realize emissions reductions enjoyed by the rest of the country.”

Jon Sanders’ Spotlight report, “The Market Forces Behind North Carolina’s Falling Emissions,” is available at the JLF website. For more information, please contact Sanders at (919) 828-3876 or [email protected] To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected]

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About John Locke Foundation

We are North Carolina’s Most Trusted and Influential Source of Common Sense. The John Locke Foundation was created in 1990 as an independent, nonprofit think tank that would work “for truth, for freedom, and for the future of North Carolina.” The Foundation is named for John Locke (1632-1704), an English philosopher whose writings inspired Thomas Jefferson and the other Founders.

The John Locke Foundation is a 501(c)(3) research institute and is funded solely from voluntary contributions from individuals, corporations, and charitable foundations.