The SCC is the thumb on the scale that can justify virtually any policy aimed at eliminating fossil fuels. When the EPA first proposed its rule to reduce mercury emissions from coal-fired power plants, the agency’s cost-benefit analysis determined the benefits would be minuscule. Any putative benefits, it turns out, would come instead from reductions in carbon emissions and, here’s the key, based on a calculated value for the SCC.

The same was true for the EPA’s earlier attempt at carbon regulation via a “Clean Power Plan,” which was shut down by the Supreme Court. But here we are again with the agency’s newest rules trying to force coal plants to further reduce mercury emissions and to force both coal and natural gas-fired power plants to capture 90% of their carbon emissions. The technology to accomplish this doesn’t exist and EPA Administrator Michael Regan admitted the rule will force the closure of fossil-fuel power plants.

The SCC values used by the EPA are derived from calculations in integrated planning models (IPMs). Those models assume a simplistic linear relationship between carbon emissions and world temperature (never mind that the validity of that linear assumptions is a subject of deep debate in scientific circles). The models then assume that the resulting temperature increases cause all forms of environmental doom – rising sea levels, more disease, and declining agricultural production – for which yet more estimates are made to assign future cost consequences.

Here’s the key: the IPMs project these costs out for the next 300 years (not a typo). Then, those far future costs are “discounted” to estimate a value in today’s dollars by using truly absurd assumptions about such things as inflation and economic growth.

A tongue-in-cheek forecaster’s creed is “Give them a number or give them a date. Don’t give them both.” Attempting to predict the future three centuries hence may be standard fare for science fiction writers, but basing energy policies on such predictions is insane.

Imagine someone in the year 1724 predicting life – and technology – today. Benjamin Franklin was 18 years old and working in his father’s print shop. George Washington would not be born for another eight years. The French scientist Antoine Lavoisier, who first identified carbon as an element in 1789, would not be born until 1743. The first patent on a flush toilet would not happen for another half-century. Thomas Edison would not invent the light bulb and the telephone for another 150 years. Could anyone in 1724 have imagined automobiles, mobile phones, and MRI machines? How about integrated circuits, nuclear power, and B-2 bombers?

To presume we can accurately predict, or even imagine, what the world will look like 300 years from now is just as preposterous. Yet, simplistic models and arbitrary assumptions are being used to drive energy policy decisions today. Using the SCC estimates, and assuming that new technologies will magically appear, the EPA can justify virtually any pollution control regulation, including those that effectively mandate electric vehicles.

Similarly, even though offshore wind generation costs five times more than natural gas and coal, the SCC can “prove” the benefits of offshore wind exceed its costs. New York State, for example, assumes that, by 2040, thousands of megawatts of “dispatchable emissions-free generators” (the equivalent of a natural gas generator burning pure hydrogen) will provide the necessary backup for unreliable offshore wind, even though no such generators exist.

Contrary to the economic fantasies peddled by green energy advocates, policies to eliminate fossil fuels based on the supposed benefits captured by the SCC will cripple the U.S. economy. Electricity prices, coupled with ill-considered plans to electrify virtually everything, will soar. Supplies will dwindle, requiring rationing, either explicitly or through rolling blackouts, such as those experienced every day in South Africa. Rather than creating some green energy nirvana, the lack of adequate and affordable electricity will cause societal decay.

All of this based on a made-up number.

Jonathan Lesser is a senior fellow with the National Center for Energy Analytics and president of Continental Economics.

Under the IRA, the lion’s share of subsidies will be paid to wind and solar developers.  The subsidies will not expire until electric industry carbon emissions fall by at least 75% below 2005 levels, after which they will gradually decrease.  Even the most optimistic forecasts prepared by the U.S. Energy Information Administration (EIA) show that this will not occur until at least 2046.  Thus, the subsidies for wind and solar will continue unabated for decades.  In total, the subsidies will far exceed what the U.S. government spent in today’s dollars to combat the Great Depression.

The single largest subsidy is the federal investment tax credit (ITC).  Most wind and solar projects will be able to claim a minimum 30% ITC, plus be eligible for an additional 10% credit if the projects rely on domestic manufacturing for components.

The EIA’s optimistic forecast projects about 900,000 megawatts (MW) of solar photovoltaics, 350,000 MW of onshore wind turbines, and 24,000 MW of offshore wind by 2046.  If all of this generation is built, it will result in direct ITC subsidies totaling between $500 billion and $1 trillion, depending on construction costs.  The greater the costs, the larger the subsidies.  Although wind and solar proponents still claim costs are falling, the reality is the opposite.   Offshore wind developers, especially, are clamoring to renegotiate contracts they signed previously, including guaranteed price adjustments for increasing costs, and relaxing the domestic content requirement so they can claim the additional 10% ITC.

Despite spiraling deficits – almost $2 trillion in the fiscal year that ended this past October – green energy subsidies will be financed with still more government debt.  With the increase in interest rates to normal levels, financing costs will soar, adding an estimated $500 to $800 billion to the bill costs, almost as much as the subsidies themselves.

The envisioned spending and subsidies for green energy, several hundred billion dollars annually just for wind and solar generation, will distort energy markets.  First, they will crowd out more productive private investment in the energy sector and reduce the resources available for more efficient forms of generation, especially small modular reactors.  Second, as the deficit increases further, higher interest rates will crowd out private investment in more productive private sectors of the economy.

Along with the Administration’s push to “electrify” the economy, such as higher vehicle mileage standards that act as a de facto mandate for electric vehicles and proposed bans on natural gas appliances, the result, as has been experienced in Europe, will be soaring electricity prices.  Those higher prices will reduce economic growth and employment, far more so than the green energy investments can boost it.  Although the subsidies will benefit wind and solar developers, but the overall economic impacts for the country will be crippling.

One gauge of the adverse economic impacts of green subsidies is the cost to taxpayers to create the promised thousands of green energy jobs, especially for offshore wind.  Using offshore wind developers’ claimed employment impacts, the average subsidy for each green job created will be over $2 million per year.  Forcing taxpayers to pay millions of dollars each year for each job created, while claiming that doing so will bolster the U.S. economy, is Alice in Wonderland economics.

Politicians who promote green energy and their own short-term self-interests may prefer to ignore basic economic realities, but those economic realities will have their revenge.  Eventually, the profligate spending on low-value green energy will collapse under its economic weight, having inflicted much socioeconomic damage.

Sadly, this is not an experiment that the U.S. needs to undertake; European experience and basic economics tell us all we need to know.  But as the lyrics from the old song begin, “fools rush in …”

About the Author

Jonathan Lesser is the president of Continental Economics, a senior fellow with the Discovery Institute, and an adjunct fellow with the Manhattan Institute.  His report, “Green Energy and Economic Fabulism,” was recently published by the Global Warming Policy Foundation.