Paris, Exxon & Energy Innovation


A libertarian friend of mine recently told me not to worry about President Trump’s rejection of the Paris Agreement, and disdain for environmental policy in general.

“If innovation in renewables can survive competition in a free market, then it’s far likelier to be successful,” she said. “The government shouldn’t be in the business of picking winners, anyway.”

I agree, sort of.

Renewable energy’s replacement of fossil and nuclear fuels is a question of when, not if. Solar and wind are often already price competitive with traditional sources, and such power stations can be built faster, and operated more economically, too.

An Internet of Energy is emerging, linking energy production with both users and storage, enabled by cloud connectivity and informed by data that erases many of the inefficiencies that were once inherent in generating electricity.

Energy innovation is a subset of a broader trend toward sustainable business practices, which are not only more efficient than the wasteful practices they replace, but less vulnerable to disruption or unforeseen costs. This evolution is is unstoppable too, if only because it makes economic sense.

Every power plant (or device) dependent on fossil fuels is at risk of political upheaval, market and currency swings, and assorted explosions and spills.

A cloudy day over the solar power plant? There’s an app for that, and electricity from a nearby wind farm is ready to recharge those smartphones.

I see two places where libertarian theology doesn’t work when it comes to energy, though.

First, the market for energy has never been “free”

The American government has been underwriting oil exploration for over a century, and these days it’s worth over $4 billion annually. Laws were passed late last century to hold oil companies responsible for spills, but there’s no accounting for all of the indirect costs they impose on the world (air quality, for starters, or wars).

It’s helpful that there’ve been recent calls for Exxon Mobil to be more forthcoming on its climate impact measurements, or lack thereof (according to the NY prosecutor’s lawsuit), but we’re a long, long away from markets making truly informed decisions about the real costs of oil.

Ditto for nuclear power; in fact, there’d be no nuclear power in America if the government hadn’t capped company liability for the consequences of a nuclear meltdown way back in 1957. Even natural gas, which is touted as a less-bad “transitional” fossil fuel, benefits from literally dozens of government incentives and programs.

Imagine how much faster we could embrace renewable energy if the US government encouraged its “free” competition as aggressively as it has oil, nuclear, or gas.

Second, no market is moral

Despite witty rebuttals and state-sanctioned ignorance, the costs of climate change can already be seen in:

The marketplace has no mechanism to respond to the underlying cause of these costs.

Instead, it could well prompt innovations to make routing those planes easier, or find more effective methods of keeping bugs off of plants. If the weather gets too hot, some startup may invent a stillsuit that lets us recycle our body moisture like they did in the desert of Arrakis in the sci-fi novel Dune.

The answers we get to challenges posed by climate change 10 or 20 years from now will be very different than they would be if we found them now, and we may discover that trusting only in market-based solutions confuses efficiency with moral outcomes.

How, where, and for how long we live is already being permanently altered, which makes the when of energy innovation more important than anything else.

We’ll innovate renewables and sustainability, but staying in the Paris Agreement, while incentivizing renewables instead of supporting fossil and nuclear fuels, would have helped us do so quicker, and potentially with more broad and satisfying effect.