An Alternative Path to the Encyclical's Call for Fossil Fuel Divestment

Yesterday, Pope Francis, the leader of 1.2 billion Catholics around the world, delivered a 184-page encyclical calling for the urgent replacement of fossil fuels with renewable energy sources.

We very respectfully see a different path forward.

Alex Epstein, author of “The Moral Case for Fossil Fuels” aptly states in a piece for the Wall Street Journal, “Solar and wind are a minuscule portion of world energy use. And even that is misleading because fossil fuel energy is reliable whereas solar and wind aren’t. While energy from, say, coal is available on demand so you can keep a refrigerator—or a respirator—on whenever you need it, solar energy is available only when the sun shines and the clouds cooperate, which means it can work only if it’s combined with a reliable source of energy, such as coal, gas, nuclear, or hydro.”

Access to affordable electricity supports quality of life, fuels progress and eradicates poverty. A study by the Manhattan Institute found between 1990 and 2010, about 830 million people—the vast majority in developing countries—gained access to electricity due to coal-fired generation. According to the United Nations Foundation, there are 1.2 billion people still lacking access to electricity and Peabody Energy estimates this number will balloon to 5.6 billion people in the next quarter century with the world energy consumption projected to grow by 56% between 2010 and 2040.

The solution is coal.

In the U.S., consumption from increasingly clean coal has risen 163 percent since 1970. During that same time period, coal-fired power plants have decreased emissions from coal including sulfur oxide, nitrous oxide and other particulate matter by 85 percent per electric unit – meeting and exceeding the EPA’s regulated air quality emissions mandated by the National Ambient Air Quality Standards.

This past track record of achieving standards demonstrates government and industry working together to set realistic goals so that the industry can continue to evolve and meet targets.

Unfortunately, Pope Francis and President Obama are not calling for the evolution, but rather the termination of the coal industry. The EPA’s proposed “Clean Power Plan” mandates states to develop plans to reduce the national carbon emissions by 30 percent. Pennsylvania, as one of the top electricity generating and exporting states has a tougher mark, needing to reduce emissions by 32 percent based on 2012 levels. As the rule is written, it will cut coal consumption by utilities 68 percent in Pennsylvania.

The extremity of the proposed rule has caused uncertainty within the coal industry and investors are hesitant to invest funds in research and development for carbon technology. As a result, the lack of available technology makes achieving the proposed greenhouse gas regulations impossible in the timeframe mandated.

With 200 plus years left of a domestic resource that sustains jobs and economies across the country, it seems foolhardy to enforce standards so extreme that the energy markets will be forced to make an artificial and uneconomical shift from coal.

Interim and achievable goals are a vital part of any industry evolvement. Carbon emissions from transportation are not far behind those emitted from the production of electricity, but the transportation sector has been given incremental fuel economy goals to meet that are attainable without shuttering an entire industry. Why is coal being singled out and not afforded the same opportunity to evolve?

With responsible regulation, investments in carbon advancements will continue to thrive and the U.S. could lead the world in clean coal technologies.

(Graph Source: EPA)

“There is a direct correlation between low-cost reliable energy and quality of life, such as clean water, food refrigeration and medical care. Coal is the primary source for these developing countries because of both the affordability and reliability and it is responsible for lifting millions out of poverty. Our moral obligation, as a developed nation is to evolve this industry so that we can continue to make increasingly clean coal technologies available both nationally and abroad,” said John Pippy, CEO of the PA Coal Alliance.

The irony is that even in our developed nation, it will be the poor and middle class most affected by this rule. There are 1.4 million Pennsylvania households earning less than $30,000, representing 29 percent of the state’s households and 48 percent of Pennsylvania’s households earning less than $50,000. These middle and low-income families spend 19 – 22 percent of their after-tax income on energy. Even the EPA admits the proposed rule will cause a rise in the cost of electricity.

According to the National Economic Research Associates, it will drive up the price of electricity 14 – 22 percent in Pennsylvania. The U.S. Chamber projects these overzealous regulations will cost U.S. consumers to pay nearly $290 billion more for electricity between 2014 and 2030.

The path to green energies is paved with good intentions, but the price tag falls disproportionately on the poor and the developing world.