Doha was a Dud—but an Economic Miracle is still Happening!

The Doha climate change conference concluded this week with what has become a familiar ring.  Nothing much of import happened and increasingly fewer people noticed.  Oh, the issues at the surface are still the same as they have been since they first flamed out in 2009 at Copenhagen.  These events have become a global debate over wealth redistribution with the poorer countries trying to guilt the richer ones into paying them not to pollute their own backyards—-and if that is not silly enough trying to get the first world nations to pay reparations to the third world for their economic success.

This year the crisis was the looming expiration of the Kyoto Protocol at the end of 2012.  That event officially removed the rationale for these annual charades since the obligations the first world made to support the climate issues of the third world officially expire.  Since the expiration of Kyoto would end the necessity of further conferences, of course, the delegates decided to extend the expiration date to 2020.  This is the great achievement of this conference—an agreement to continue to the debate and meet annually in exotic locations spending other people’s money.

Yes, I know, I am making fun of this event.  But you must admit there are some inconvenient truths that are not spoken in polite climate change company such as:

  • The global economic situation is not good and few nations feel rich enough to take on the burden of subsidizing the rest.  The EU has Greece, Spain, Italy, Portugal and Ireland and a few other piglets to worry about.
  • The first world stepped up and pledged support for climate improvements but many of the fastest growing emerging economies refused to participate—so China, India and others were worried about climate change when they thought the first world would pay them to fix their own problems, but not worried enough about it to fix them on their own?  Please!
  • The US is spending money like a drunken sailor on shore leave with debt and deficits beyond imagination.  Our own fiscal cliff approaches and climate change subsidies to third world countries likely will not be our highest priority.

And then there is the matter of results.  Japan faced a terrible earthquake and tsunami that damaged its nuclear fleet so it turned away from nuclear to natural gas in the form of LNG at least as a bridge fuel.  The Germans over-reacted and began shutting down their nukes and decided to build more coal fired power plants.  Does this sound like an unwavering commitment to emissions reduction to you?

In the US, the shale revolution is increasing supply and driving down prices in a market that is rapidly being transformed from an import energy economy to an export economy.  Low energy prices are a cardinal sin in the environmental community because they encourage more use of fossil fuels and undermine the economics of most favored renewable energy which cannot yet stand on its own without subsidies.   So imagine the shock and awe to discover that the part of the world with the fastest decline in greenhouse gas emissions is none other than the United States of America!  EGADS!  Markets actually work!  A command and control economy is not necessary to produce emissions reduction!  EGADS!!!  How will we ever enforce our political correctness if markets rationalize capital investment and make changes so fast we cannot build a coalition against them?   EGADS!!!  We didn’t need a cap and trade system of carbon taxes to get this result either!  EGADS!!!

Markets abhor vacuums even while they profit from uncertainty.  Markets seek equilibrium and will not be denied.  The market forces of self-interest and survival are more powerful and more constructive than any on earth and in today’s anxious global economy rational behavior is working to find its way back to equilibrium and then growth.

The dirty little ‘inconvenient truth’ secret from Doha is the global economy is finding its own way back to balance. That market equilibrium will return us to growth and reduce greenhouse gas emissions at one in the same time because the markets have decided to take matters into their own hands and deprive the politicians in every nation of an excuse to spend other people’s money until the entire world goes over a fiscal cliff.

High energy prices may be good for traders and speculators but they are cancer for economic growth.  The markets have decided that the shale revolution is real and it is going to be used to create an era of low energy prices from adequate supply sufficient to get the global economy growing again.

And for Americans in a funk over the fiscal cliff, government spending excess and huge debt and deficits, the government has largely been a bystander as the markets took charge and the shale revolution scaled on private lands, with private investment, and private initiative.  It is so powerful even a president running for re-election who opposed it took credit for the energy production growth.

The low priced shale energy resolution is here and now!  It may not last forever.  It may not be as powerful in other parts of the world where private property rights are weak or geology less favorable.

Who would have thunk it!  Low price energy is leading us to reduced greenhouse gas emissions, a stronger growth-driven economy, and a more secure energy future.  That is an inconvenient truth worth savoring.

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