Benjamin Zycher of the American Enterprise Institute recently testified about false assumptions underlying the fight against fossil fuels.
The “Low-Carbon World” assertion explicit in the title of this hearing assumes a structural economic shift away from conventional energy — fossil fuels — that is virtually certain not to be observed. Because fossil fuels are overwhelmingly the most efficient forms of energy available now or prospectively, market forces will not engender a massive shift away from them toward such unconventional forms of energy as wind and solar power. Such unconventional energy technologies are uncompetitive because they are far more costly and far less reliable than conventional energy. That is why they cannot survive a competitive market test, and it is only large subsidies, both direct and indirect, and other policy-driven subventions that allow them to survive. Accordingly, market forces will not yield a sharp decline in the market value of those significant parts of the capital stock complementary with the production, transport, and consumption of conventional energy, that is, a “stranding” of the relevant respective components of the capital stock. Moreover, any such market shift would take place over many years or decades as part of the long-term process of capital depreciation, investment, and changes in resource allocation. Accordingly, no market-driven “stranding” of capital assets will be observed.
Market-driven shifts in the values of capital assets are not an appropriate focus for government policies given the central principle of resource allocation driven by individual preferences reflected in market prices. Shifts in market conditions always have resulted in changing relative prices and wealth distributions, in particular as a result of technological advances, and there is no principle consistent with support for a market economy that would be imply a role for government in terms of accelerating or hindering such shifts.
Nor will government policies engender such a massive economic transformation, that is, a “stranding” of capital assets complementary with conventional energy. With the exception of the methane tax included in the Inflation Reduction Act, Congress has never enacted a statute mandating direct reductions in greenhouse gas (GHG) emissions, for the obvious reason that large reductions in such emissions cannot be achieved without sharp declines in the consumption of fossil fuels, that is, a large increase in energy costs that would not be consistent with the political interests of elected public officials.
