At a recent summit in Sapporo, Japan, leaders of the international Group of Seven (G7) reaffirmed calls to decrease fossil fuel use dependency while increasing renewable energy generation globally. While deploying more cost-competitive renewable power can help keep electricity prices affordable while lowering emissions, a government-forced energy transition could cause energy instability, hurting consumers, the economy, and the environment. Instead, G7 leaders should adopt a more holistic energy approach that leverages free enterprise to drive clean tech progress and deliver reliable and affordable power to the world.
The G7’s calls to ban fossil fuel development are not new. Last year the group vowed to end investments for fossil fuel projects by the end of 2022, a plan that was thwarted due to last year’s global energy squeeze. While the G7’s recent gathering did not produce a definitive timetable for divestment from oil and natural gas, France’s energy transition minister Agnes Pannier-Runacher told reporters that the group “cannot invest in the exploration of new gas capacity.”
Fossil fuels currently supply over 80% of the world’s energy generation, a trend that is expected to continue for years to come as emerging markets develop and the global population climbs. While innovation and the adoption of low-carbon technologies are critical to meeting key environmental objectives, it is private markets, and not the government, that should be leading the charge to bring more clean technologies online.
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A top down, government-centric energy approach has been detrimental to consumers and innovation. In 2011 Germany famously implemented its Energiewende, shutting down its fleet of nuclear energy which provided nearly a quarter of the nation’s power, and pivoted to renewables and Russian natural gas to meet its energy needs. This shift precipitated several negative economic and environmental consequences. In 2022, German consumers paid the third highest rate for electricity in the European Union while annual household gas costs skyrocketed by 173%. Germany has also become increasingly reliant on coal-fired power generation as the country has phased out its remaining nuclear power plants.
While the G7 implores the rest of the world to go green, it continues to rely on traditional energy sources to meet its power needs. This “do as I say, not as I do” approach to banning fossil fuels drives up energy costs and denies access to the developing countries that need energy the most. Regressive energy policies and high prices can be one of the largest roadblocks to economic prosperity around the world. A recent analysis from Stanford University found that in Uganda, communities that had reliable electricity access were able to increase their wealth at twice the rate of communities that didn’t have access to electricity. Ending fossil fuel development would deny the developing world access to reliable and affordable energy and stifle economic growth.
Hampering these countries’ economies will only deter their environmental progress. Economic wealth is historically one of the largest drivers of environmental and climate progress around the world. As countries increase their economic stability, they become more able to build essential infrastructure such as clean water and sanitation systems, roads, and schools. Only when these resources have been established can a developing country invest in the luxury of clean energy technologies. It’s projected that the majority of future emissions will come from the developing world as they experience economic growth. Denying these nations access to reliable energy today will not only keep these countries poor, but will also stall meaningful climate progress by delaying their shift to cleaner energy generation.
Instead of banning unwanted energy sources like fossil fuels, the G7 should work to balance the energy mix, incorporating all necessary options to deliver affordable energy to the world. American-sourced oil and gas can be a part of this mix, as it is produced with far fewer emissions than dirtier Russian or Venezuelan fuel. So too can traditional and advanced nuclear power which is being exported around the world as countries look to bolster energy security and reduce carbon emissions. Renewable power should also play a growing role in international energy development given its affordability and scalability.
To its credit, the G7’s current plan implores countries to establish “predictable policy and regulatory environments” to drive innovation. The G7 can further drive innovation and accelerate a market-led shift to cleaner energy sources by reducing burdens for the private sector. This includes implementing pro-growth tax policies like immediate expensing—which has drastically increased private sector R&D expenditures in the U.S.— and streamlining the permitting process to bring clean technologies online.
Instituting government-led phaseouts of fossil fuels before the market is ready to lead will create higher energy costs around the world and hamstring global economic and environmental progress. Instead, G7 leaders should unleash economic freedom to empower markets to meet the world’s energy needs and reduce global emissions.