December began with three major news items from the climate and energy world, and none of them included the name Solyndra. While the failed solar company garners front-page attention, global carbon emissions continue to soar unabated, and the oil and gas industry confounds decades-old predictions about the decline of oil supplies domestically. Though the latter may strengthen U.S. energy security, the overall trend serves as a sobering combination for our climate and economic future.
On December 3rd, the New York Times reported on an analysis by the Global Carbon Project that found emissions of carbon dioxide worldwide grew in 2010 by the largest margin on record. The Times described the 500 million ton increase as “almost certainly the largest absolute jump in any year since the Industrial Revolution,” putting to rest any suspicions that the global economic downturn would continue to suppress energy demand.
The emissions data came out only days after reports that the U.S. is on pace to become a net exporter of refined petroleum products in 2011, a status last seen in 1949. According to U.S. Energy Information Administration data cited in the Wall Street Journal (subscription required), the shift is driven by exports of gasoline, diesel, and steelmaking inputs. The U.S. remains the largest net importer of crude oil, the raw material of these refined products. However, this status may soon be changing as well.
In a separate article, the Wall Street Journal highlighted a prediction by PFC Energy, a Washington-based consulting firm, that the U.S. will surpass Russia and Saudi Arabia as the world’s leading producer of oil and gas by 2020. The cause is a recent shift by major oil companies like ExxonMobil and Shell to refocus on North American petroleum resources. Oil and gas deposits in deep shale formations throughout the U.S. and in the oil sands of Canada are now economical due to new drilling and extraction techniques.
Among energy experts, these are momentous changes. However, the average American citizen likely knows more about Solyndra than any of the items above. The unraveling of Solyndra certainly warrants investigation, but the controversy threatens critical future government support for energy technologies that are increasingly in demand around the world. Japan and Germany are turning sharply away from nuclear power after Fukushima and seeking alternatives. China, India, Brazil, and other emerging economies have growing energy needs but are also beginning to face up to environmental challenges.
Critics of public investment in clean energy companies often argue that the government has no business picking winners and losers. However, this blatantly ignores the billions in subsidies for the fossil fuel industry and the disregard for the externalities associated with electricity production and transportation.
As James Surowiecki argues in a recent New Yorker piece, the true believer in efficient market solutions would advocate to repeal all oil and gas subsidies and to institute a price on pollution that reflects its true social cost. Only then would the market have the full information on which to choose the best available fuel sources and technologies.
Given the current political infeasibility of such steps, Mr. Surowiecki sees government loan guarantees as the best available alternative. The $500 million lost on Solyndra, while regrettable, represents one-fortieth of all stimulus program loan funds disbursed by the Department of Energy thus far. A Bloomberg Government study showed that eighteen of the twenty-eight projects receiving loans through the program are considered low risk, and the government specifically set aside $2.47 billion to cover just such a default. Solyndra will not be the last loan recipient to fail, but the current success rate is impressive.
As long as the consequences of rising carbon emissions remain unaccounted for in markets, government support is the only mechanism we have to partially level the playing field for cleaner energy technologies. Eliminating this support now will undercut promising companies and perpetuate an energy policy that condemns us to the worst that climate change has to offer.