The role of gas taxes in sparking the recent Yellow Vest protests in France pushed the political climate change agenda back into the spotlight. Less talked about is the growing global interest in coal power plants around the world, including by countries such as Japan, South Korea, China, Turkey, and Australia. This is in spite of repeated assertions from “experts” that coal was a dying industry that would never return.
What explains the turn around?
In the Wall Street Journal today, Rupert Darwall argues that the boom in renewable energy was an example of malinvestment generated from low interest rates globally.
The latest climate talks ended here Saturday, a day late, with agreement largely reached on a rule book to implement the nonbinding Paris Agreement. The bigger story is how the United Nations climate process is losing its battle with reality....
Explaining why the efforts thus far hadn’t bent the curve of rising emissions, the Potsdam Institute’s chief economist, Ottmar Edenhofer, said the fundamental reality was an oversupply of fossil fuels, making it harder for renewables to be cost-competitive with coal. An underappreciated factor, he suggested, is monetary policy. Zero interest rates act as an artificial stimulus to renewable energy, which is much more capital-intensive than gas and coal. To students of Austrian economics, it’s a classic malinvestment: When interest rates are suppressed below the natural rate, too much of the wrong sort of investment leads to a boom, then a bust.
As interest rates rise, renewable energy can’t compete without carbon pricing—economists’ magic bullet to solve global warming. Therein lies the biggest cause of despair at Katowice.
Of course uncompetitive pricing in the face of growing economic headwinds will do nothing to reduce the exuberance of climate interventionists that are convinced renewable energy is key to saving the world, so it will be interesting to see what they do next.
While the political unrest in France is about much more than gas taxes, it did reveal the difficult reality of actually imposing climate change policies that directly increase the cost of living on low and middle class citizens.
As populism continues to grow around the world, with Belgium’s prime minister resigning just yesterday, it’s possible that the imposition of climate change policy becomes a new front in the political divide between political globalists and nationalists.
Related:
Dr. Robert Murphy on the Dubious Economics of Climate Change | Mises Weekends with Jeff Deist
For Climate Interventionists, New Taxes are Only the Beginning by Robert Murphy
Fear Global Warming? Markets Offer Our Best Chance for Survival by Ryan McMaken
