Competition and innovation, not top-down mandates, will drive clean energy production
By Matt Patterson, August 9, 2021
Free markets breed innovation. Nowhere is this more evident than in the energy sector. Climate activists and the Biden Administration believe that government intervention, clean energy mandates, and trillions of dollars in “green infrastructure” spending will compel the industry to move toward cleaner energy production.[i]
This is simply not the case. The belief that the energy industry, left to its own devices, will do nothing to reduce emissions or produce cleaner energy is false. Cleaner energy production can be achieved without harmful mandates that will undoubtedly drive smaller energy companies out of business. These innovations are happening right now across Texas and the nation.
Occidental Petroleum, a Houston-based oil and gas company, has made reducing emissions and increasing energy efficiency a priority. In January of 2021, Occidental announced its plan to build the world’s first large-scale direct air capture (DAC) plant that will remove carbon dioxide from the atmosphere and safely inject it back into the earth for permanent storage.[ii] Bloomberg explains that “the plant will be designed to capture as much as 1 million tons of carbon dioxide a year, equivalent to the emissions from about 215,000 cars.”[iii] Energy companies like Occidental not only see carbon capture as economically beneficial, but profitable as well.
Exxon Mobil, another Texas-based energy company, believes that “carbon capture will be a $2 trillion market by 2040” and that “it is the cheapest way to address emissions.” The company has announced that it will invest $3 billion toward these projects through 2025.[iv] Additional investment from companies, and allowing the free market to work, will lead to direct air capture becoming cheaper and more feasible for large-scale implementation. As is the case with most clean energy ventures (particularly renewable energy ventures), there is some involvement from the government in terms of tax credits or financial incentives for the new technology.[v] It remains a fact, however, that these technological advancements would never have been achieved (or implemented so rapidly) if it weren’t for the free market encouraging innovation. If climate activists and the Biden Administration had their way, they would foolishly attempt to rapidly transition away from any advancement in fossil fuel technology, rendering carbon capture innovation obsolete.
Chevron has announced the launch of an initiative called Chevron New Energies. The purposes of the new venture include “commercialization opportunities in hydrogen, carbon capture, and offsets and support of ongoing growth of biofuels.”[vi] In a press release announcing the venture, Chevron CEO Michael Wirth proclaimed, “the dedication of resources in a new organization will accelerate growth in multiple business lines that we expect to be part of a lower-carbon energy system.”[vii] Chevron has also previously taken steps to tie executive compensation to reductions in emissions, a tactic that several companies have taken in recent years.[viii] These are strategies and initiatives that companies have taken in the free market, separate from any government mandates or interference.
Companies like Occidental, Exxon Mobil, and Chevron are constantly searching for ways to make cleaner energy more profitable. In order to innovate, however, the federal government needs to get out of the way and allow the free market to work. In the 87th Regular Session, Texas Legislators passed House Bill 1284, which will allow the state to begin approving permits for carbon capture and storage.[ix] The bill will shift jurisdiction of carbon dioxide repositories from the federal government to the Railroad Commission of Texas (RRC); a prudent move considering carbon capture is deeply connected to the state’s oil and gas industry. As The Conservative Energy Network details, “Wresting control back from the federal government will allow the state to be more responsive as the carbon capture industry continues to develop.”[x]
So, what happens when the federal government exerts control over the energy sector? As it turns out, it is bad for both the environment and the economy. On his first day in office, President Biden revoked a cross-border presidential permit for construction on the Keystone XL pipeline. The revocation of the permit was the nail in the coffin for the $8 billion project which would have used renewable energy to operate and eliminated all greenhouse-gas emissions from operations by 2030, which could have generated $3.5 billion U.S. GDP growth. Not only will the cancelation of the pipeline cost the U.S. billions of dollars in revenue, it will be costly to air quality as well. Moving oil by pipeline produces 42 percent fewer emissions than transporting oil by rail, according to the American Energy Alliance, which is how the oil is being transported in lieu of Keystone XL. Since 2008, the use of rail to ship oil has increased by a factor of 50, adding $5 to $10 per barrel in additional cost and creating greater environmental and safety risks.[xi]
When the free market is not allowed to operate, government picks winners and losers at the expense of consumers and the environment. Left-wing opposition to hydraulic fracturing to access America’s vast natural gas reserves provides another strong example of this destructive tendency. In 1990, coal accounted for around 40 percent of U.S. electric generation and natural gas accounted for around 19 percent. By 2020, thanks in no small part to advances in hydraulic fracturing, the situation had reversed: coal accounted for around 20 percent and natural gas around 44 percent of electric generation.[xii] The market, often in spite of government-led efforts to curb hydraulic fracturing in some states, has provided an abundant, reliable, and relatively clean source of electric generation that was unimaginable until relatively recently.
Texas is among the world leaders in energy production and is primed to become a world leader in clean energy solutions. A cleaner environment won’t be achieved through top-down government mandates, but through innovation and the invisible hand.
[i] https://www.politico.com/news/2021/04/22/biden-climate-goal-congress-484141 [ii] https://www.oxylowcarbon.com/carbon-neutral/about-us [iii] https://www.bloomberg.com/news/articles/2021-01-13/occidental-oxy-wants-to-go-green-to-produce-more-oil [iv] https://www.wsj.com/articles/exxon-once-a-skeptic-sees-profit-in-capturing-carbon-emissions-11614787892 [v] https://fas.org/sgp/crs/misc/IF11455.pdf [vi] https://www.hartenergy.com/exclusives/chevron-launches-new-energies-unit-led-former-us-shale-head-195402 [vii] Ibid. [viii] https://www.npr.org/2021/04/20/988686847/some-ceos-are-hearing-a-new-message-act-on-climate-or-well-cut-your-pay [ix] https://capitol.texas.gov/BillLookup/Text.aspx?LegSess=87R&Bill=HB1284 [x] https://www.conservativeenergynetwork.org/co2-capture/ [xi] https://www.americanenergyalliance.org/tag/keystone-xl/ [xii] https://www.eia.gov/energyexplained/electricity/electricity-in-the-us-generation-capacity-and-sales.php