Solar, Coal, and the Not-So-Easy Calculus of the Paris Accords Withdrawal

By June 5, 2017Blog

President Trump’s announcement last week that he was withdrawing the United States from the Paris Climate Accords, though expected, drew swift and polarized reactions from across the globe. While supporters of the move touted the economic benefits, critics shrewdly pointed out that environmental considerations and economic outcomes are often inextricably linked. Indeed, the impact of negative externalities such as pollution have long been a broadly accepted cornerstone of economic theory. With greenhouse gas-driven climate change possibly the greatest externality ever observed, the economic implications are likewise enormous.

So how will withdrawing from the Paris Accords shake out for the U.S. economy? Well, in the short term at least, not much should change. Paris Accords or no Paris Accords, green energy initiatives have a lot of momentum both at home and abroad, and the President’s decision will not severely stem that tide. This is especially true given the coalition of governors and mayors vowing to independently abide by the agreement. Likewise, while they might experience a temporary boost, this is not an unprecedented windfall for American fossil fuels production. Coal is still going to die. As has been pointed out many times, that industry’s collapsing job market had a lot more to do with changing market conditions (read: fracking) than it did with President Obama’s so-called War on Coal.

But looking at the death of coal jobs also highlights an interesting dynamic in the contemporary economic calculus of the U.S. energy sector. Increasingly, the number of jobs associated with different types of energy production are used as a proxy for their economic importance/viability; the Washington Post’s exposition on the relatively modest size of the U.S. coal labor force comes almost as a ready-made counter to President Trump’s decision. But while this logic may seem perfectly reasonable on the surface, it runs the risk of succumbing to the shovel-spoon fallacy apocryphally attributed to Milton Friedman. In other words, more jobs does not necessarily equate to greater economic efficiency, particularly if those jobs are created solely by government mandate.

With that in mind, let’s take a look at the numbers. Coal (as the Washington Post so helpfully informs us) currently supports about 76,000 jobs, while The Solar Foundation pegged 2016 employment levels within their industry as 260,000. Conversely, coal accounts for 17 percent of 97.4 quadrillion Btus of domestically-produced energy in 2016, compared to the just 12 percent generated by all renewables. Thus, even attributing all renewable energy production to solar, the coal industry produced on average nearly five times as much energy per worker than America’s much-vaunted solar sector.

This does not prove coal is better than solar; there is in fact no shortage of effective counter-arguments to that notion. What it does do is lay bare the fact that good economic analysis is usually more complicated than a single, easily digestible metric crammed into a sound bite. In a similar vein, the President would be wise not to ignore the geopolitical implications of his decisions. While sticking it to the globalists might make for good press, if the world responds with something like a carbon tariff, then suffice it to say that we’re gonna have a bad time

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