When Republicans gathered in Milwaukee two weeks ago, they approved a platform hailing the importance of energy but light on specifics. While we heard vague mention of “unleashing American energy,” it’s imperative Republicans aggressively counter purportedly well-intentioned, but ultimately destructive, environmental, social, and governance policies.
The road to hell, as they say, is paved with good intentions. Similarly, in the world of ESG activists, the path to increasing greenhouse gas emissions and economic stagnation is paved with wishful thinking and willful blindness. It’s difficult to find a wider gap than that between ESG advocates’ high-minded ideals and the devastating real-world consequences of their policies.
Until ESG advocates recognize the folly of their environmental crusade, Western countries will see their economic growth and quality of life deteriorate.
Virtue-signaling ESG policies create significant costs, transferring economic prosperity from populations under ESG’s thumb — including the United States and our allies — to those who reject ESG’s environmental agenda — mostly our economic competitors and security adversaries. Rather than exporting goods and services made in America, we are exporting our industry and our emissions instead.
Countries that embark on ESG’s crusade against fossil fuels and in favor of renewable energy mandates inevitably see their energy prices skyrocket. Electricity in the European Union costs twice what it does in the United States. And electricity in the U.S. costs twice what it does in China. The costs of fuel and fertilizer follow the same trend. Higher energy costs, in turn, reduce heavy manufacturing and other energy-intensive economic activity.
China is rapidly expanding its coal-fired electricity capacity. Despite the pollyannish and unsubstantiated reports that Chinese coal power generation is much cleaner and more efficient than what we produce in America, the scale of the production remains a challenge. It currently produces over a quarter of the world’s annual carbon dioxide emissions. And the air quality in Chinese cities is notoriously bad.
What looks like successful reduction of GHG emissions in the United States and Europe is merely energy-intensive industries moving to China, India, and other cheap-energy countries. Instead of expanding, energy-intensive U.S. industries like the steel, concrete, automobile industries, and more find themselves at a growing disadvantage compared to other countries.
Restrictive, costly ESG policies export GHG emissions to countries with cheaper energy. This is bad for our economy and our workers, and it doesn’t help the environment as GHG emissions aren’t reduced, only moved. U.S. policy should focus on making our industries more competitive and efficient by unshackling energy development domestically and cutting back the overgrowth of red tape.
ESG ratings firms like Sustainalytics, MSCI, and S&P Global have penalized publicly held companies for holding and using fossil fuel assets like oil or natural gas fields. These public companies receive lower ESG ratings, which in turn increases the cost of financing their operations. When these companies “divest” or sell fossil fuel assets, their ESG ratings improve.
But the entities to which they sell their fossil fuel resources — either private companies or large, government energy companies — continue pulling fossil fuels out of the ground. For example, Chevron sold its 75% stake in South African oil assets to Sinopec in 2017 as part of a strategy to reduce its carbon footprint. But the Chinese exploit these oil assets too. Just this year, Shell announced that it would divest fossil fuel assets in South Africa as part of its “Energy Transition Strategy.”
Similarly, BP sold its significant interests in Prudhoe Bay and the Alaska oil pipeline to a private company, Hilcorp, in 2019. The $5.6 billion deal was part of BP’s $10 billion divestment program. Other examples of public companies shedding emissions-related assets include Hess selling fossil fuel assets to a private company, Ineos, in 2021; Shell selling its oil sand assets to Canadian Natural Resources in 2017; and Lockheed-Martin selling its energy services business in 2019.
In none of these cases have greenhouse gas emissions been reduced.
Until ESG advocates recognize the folly of their environmental crusade, Western countries will see their economic growth and quality of life deteriorate while global greenhouse gas emissions continue to rise. We need a sensible energy policy that recognizes the economic effects of renewable energy mandates and fossil fuel moratoriums.
Good intentions are not enough.
Opinion & analysis