Green Energy Transition Won’t Happen Without Major Sticker Shock

One of the biggest issues confronting advocates of the green energy transition is who will pay how much for how long to make it happen.

The condescending reply is along the lines of “money should be no object when the alternative is extinction.”  But everything – even things green and beneficial – has a cost. And the Wall Street Journal’s Greg Ip writes, the price tags are causing sticker shock among companies, investors, and consumers. And unlike other changes in economic activity, there’s no way to know if the green switch will provide an economic boost:

Technological transformations are positive supply shocks: a new, more efficient technology comes along, and investment naturally gravitates toward this new technology because it is profitable. 

By contrast, the green transition is driven by public policy. It is “a negative supply shock, with an accompanying need to finance investments whose profitability cannot be taken for granted,” French economist Jean Pisani-Ferry wrote in a report commissioned by the French prime minister and released in English in November. “By putting a price—financial or implicit—on a free resource (the climate), the transition increases production costs, with no guarantee that the reduction in energy costs will eventually offset them, while the investments it calls for do not increase productive capacity but must nevertheless be financed.”

Financing those changes in a world of zero, or in some places, negative, interest rates seemed almost pain free. But in a world where interest rates have returned to more historically normal levels – in an effort to fight government-induced inflation – it’s no longer possible to fund windmills on the cheap, or offer high-priced electric cars to early adopters eager to try the latest toy.

The transition toward renewables will require developers, regulators, policy makers, and the voters who get stuck with the bills a multitude of choices – who pays how much, for what level of service, for how long?

And alongside that, what choices will no longer be offered? No gas appliances? Fewer vacations? An increasingly meat-free diet?  All at a cost.

And all a question of how much we’re willing to pay for it.

The opinions expressed in this article are those of the author and do not necessarily reflect the positions of American Liberty News.