Saturday, 13 June 2015

The poor need affordable energy

To some extent, Big Energy is responding to the challenges of climate change and peak oil:
Futures Forum: Climate change: businesses wake up to climate action

... although the questions remain as to how far they are overstating their case:
Futures Forum: Gas vs coal: overstating the case

... or how far their business model still stacks up:
Futures Forum: Overproduction and the end of Big Oil's business model

... or, indeed, how sincere they are in their pronouncements:
Futures Forum: "Exposing the futuristic fantasies deployed by the fossil-fuel companies"

One of the strongest arguments being put forward by Big Energy is that it offers 'affordable energy':
Futures Forum: "Abundant, cheap electricity has been the greatest source of human liberation in the 20th century."

... but not everyone agrees:
Futures Forum: "The disingenuous campaign to promote coal as the solution to energy poverty"

The argument has been put forward for some time now:
The Weekend Interview with John Watson: Oil Without Apologies - WSJ
The Energy Renaissance - Chevron 

This is the latest comment from the Foundation for Economic Freedom:

Affordable energy is fundamental to what economist Deirdre McCloskey calls the “Great Fact” of the explosion of human welfare. It remains central to the reduction of absolute poverty. Yet, some Western governments are working toincrease energy costs, purportedly to combat global warming.
What they are really combating is prosperity.
This is perverse and regressive. In America and Europe, energy takes up a much larger share of poor households’ budgets compared to other income brackets. For instance, a household with an annual income between $10,000 and $25,000 spends well over 10 percent of its budget on energy, according to the Bureau of Labor Statistics. And a January 2014 study for the American Coalition for Clean Coal Electricity found that “households earning $50,000 or less spend more on energy than on food, spend twice as much on energy as on health care, and spend more than twice as much on energy as on clothing.”
Increasing the cost of energy also harms people’s health. That’s because energy use is so fundamental to modern life that it can take precedence over other household expenses — including health care. The National Energy Assistance Directors’ Association found that an increase in energy costs led 30 percent of poor households to reduce purchases of food, 40 percent to go without medical care, and 33 percent to not fill a prescription.
The term “fuel poverty” describes households in cold climates that are not able to keep their home warm at an affordable cost. The primary causes of fuel poverty are low income, poor insulation, and high energy prices. Eight percent of households in Belgium, France, Spain, Italy, and the United Kingdom suffer from some form of fuel poverty, according to the European Union’s European Fuel Poverty and Energy Efficiency consortium project. In the UK, where there is much more data owing to an official designation of fuel poverty, a household is defined as fuel poor if it has to spend 10 percent of its income on essential energy services; 20 percent of households meet this definition.
Despite this, Western governments are pursuing policies to increase energy prices. President Obama said during his first election campaign that electricity rates from coal would “necessarily skyrocket” under his policies; this may finally come to pass under his EPA’s proposed Clean Power Plan. In Western Europe, energy costs have increased due to a combination of renewable energy subsidies and mandates, bans or moratoria on hydraulic fracturing (“fracking”), hostility to nuclear energy, and Russia’s control of natural gas supplies for much of the continent’s eastern half.
Despite the president’s policies, US energy markets have shown that innovation beats regulation every time. Even though huge swaths of American energy resources are locked up under untouchable federal lands, energy production has boomed over the past decade, thanks to the development of horizontal drilling and improved hydraulic fracturing techniques. These technological advances have led to lower electricity prices from natural gas. And subsurface property rights have benefited both urban and rural households through royalty payments for energy production on their land.
Moreover, as gas became more affordable, it led to a reduction in greenhouse gas emissions. Indeed, thanks to energy innovation, America met the emissions targets set for it in the Kyoto Protocol, without any need for burdensome laws and regulation — or for the Kyoto Protocol itself. Whatever you think of the need for carbon emissions reduction, energy innovation is achieving that goal.
This is all to the good, but more energy innovation is possible. They key is greater liberalization. America should free up federal lands to energy development, rather than pickle them in regulatory aspic. Europe could enjoy its own energy boom by approving hydraulic fracturing.
Reducing artificially high energy costs is the first step in tackling fuel poverty. In America, the market is alleviating the burden of energy costs on poor households, even as the government goes the wrong way. That shows us the way forward for tackling the much greater problem in the developing world.
Iain Murray
Iain Murray is vice president at the Competitive Enterprise Institute.
The Poor Need Affordable Energy : The Freeman : Foundation for Economic Education

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