We are reading so much lately about what is happening in the US on sustainable energy and climate policies and programmes. It seems as if the policy gyrations will continue for some time. Michael McDonald writes from Oilprice.com on the Yahoo Finance website, showing data that dispels the myth that shifting to a green economy will harm the economy. What do you think?
Is The Renewable Transition Harming The U.S. Economy?
Recent data from the 2017 Sustainable Energy in America Factbook suggests that sectors of America’s energy market are quickly shifting towards greener energy, while also dispelling the myth that such shifts will hurt the economy. Despite a GDP growth of 12 percent since 2007, America’s usage of energy has fallen by 3.6 percent. Analysts believe this to be indicative of a new stage of American history in which energy productivity is improving, while increasingly less energy is needed to sustain growth.
These movements are overlapped by dramatic decreases in greenhouse gas emissions. In fact, 2016 marked a 25-year low – emissions have dropped 12 percent since 2007. As part of the original Paris Agreement, the U.S. has pledged to reduce national greenhouse gasses by over 25 percent by 2025 – these new numbers mean we are nearly halfway there.
These numbers are supplemented by the fact that consumers spent less than 4 percent of their annual household income on energy. This is the smallest estimate ever collected in America. Further, retail rates for electricity have fallen nationally by 3 percent. But in some regions, Texas for example, retail prices have fallen by as much as 29 percent. Moreover, since its peak in 2014, demand for electricity has fallen 1.2 percent. During the same period of time, GDP has grown 4.2 percent.
These numbers seem to contradict the widely-held belief that if America shifts away from carbon-based energy, we will either face economic deceleration, or radical price increases.
Further details concerning 2016 show that renewable energy sources have also spiked. Last year, the U.S. created 22 gigawatts of new renewable-energy-generating capacity. 12.5 of these gigawatts were generated from the solar industry. The wind industry contributed 8.5 gigawatts, and the remainder was comprised of additions from hydropower, biomass, biogas and waste-to-energy.
Renewable energy itself has grown to become 15 percent of total energy production in the U.S., up from 9 percent in 2007. Most of these successes are the result of declining prices in the renewables sector. The original barrier to entry for these renewable energy sources was the lack of competitive pricing compared to carbon-based fuel. However, these two price-points have been slowly converging.
Coal plants are also becoming less efficient, so that 7 gigawatts of capacity normally derived from coal have been eliminated from the U.S. supply of energy. This is after a record breaking 15 gigawatts were disconnected in 2015. Coal provides a smaller share of all U.S. electricity than it ever has before.
However, these changes seem to be limited to retail energy, and a possible detractor of these changes is transportation. Electric vehicles, for example, make up only 0.9 percent of all vehicles sold in the U.S. This is supplemented by gasoline purchases, which are up over 3 percent year over year.
These trends are expected to continue in coming years, despite the mandates from the EPA and the new Corporate Average Fuel Economy (CAFE) standards. CAFE standards were initially created in an attempt to curb inefficient gas usage by consumer vehicles; they force automobile makers to increase the fuel economy of their vehicle fleet every year. Current standards mandate that by model-year 2025, fuel economy must be increased by approximately 10 mpg collectively. Whether or not this is achievable, however, remains to be seen – while these specific CAFE standards dramatically improved fuel economy when first implemented in 2012, the growth has plateaued for the last three years at 25.1 mpg. This is in conjunction with increased sales in large SUV vehicles and trucks.
These indicators further support the notion that despite continued improvement in the retail electricity sector, the shift to renewable energy as a whole can be dramatically offset by the continued growth in the transportation sector, and the lack of improvement concerning fuel economy.