Energy vs. Ecology

Luis Rubio

In the Christmas movie “It’s a Wonderful Life”, Clarence, a guardian angel, shows leading character George Bailey what would have happened had he not lived. For this Clarence invents the town of Pottersville, bad guy Potter’s city, to illustrate how terrible and inhospitable the place would have been had Bailey not been born. Bailey reconsiders his decision to jump off the bridge and returns triumphant in the Hollywood-style epic. The problem, says Gary Kamiya*, is that many prefer the exciting and perverted life of Pottersville to the boredom and tranquility that Bedford Falls represents. In Bedford Falls everything is an ideal world from the perspective of what’s “correct”; Pottersville is a world of the desirable, of amusement. This metaphor serves to illustrate that the politically correct is not always the best public policy.

Over the past years, the country adopted a series of measures in energy and environmental matters that would be logical and acceptable –politically correct- in an ideal world, but that clash with the best interests and characteristics of the country at present. Specifically, at the beginning of last year legislation was passed on environmental matters (the General Law of Climate Change), adopting a regime nearly as strict as that distinguishing the European Union. The legislation establishes highly restrictive goals, such as those for 2024, when 35% of the energy that the country produces should derive from renewable sources and that by the same date carbon emission should be 50% less than those of 2000. Approval of the law brought with it two reactions: on the one hand, the applause of all of the politically correct who legitimately embrace a less contaminated world, but generally without contemplating the implications of the regime adopted. On the other hand, as usual in Mexico, the law establishes grandiose goals but no specific instruments or sanctions. That is, some due to apathy and others due to responsibility, our legislators opted for applause without generating intolerable costs. An additional step in this direction has been taken with the government’s proposal to launch a carbon tax.

From my perspective, the central criterion that we Mexicans should adopt for the future is that of economic growth. This objective is the only one that brings together the parties, the political forces, the unions, the business community and the citizens: we all want a driving and buoyant economy that permits raising the quality of life, generating more and better jobs and creating more amenable conditions for resolving the country’s problems –the new ones and those we inherited. In this world era, the sole way to achieve growth is raising productivity and being more and more competitive. The question is whether this clashes with the environmental plan being advanced.

In pragmatic terms, it is imperative to recognize two factors: on the one hand, paradoxically, no international treaty or legal regime, such as those proposed at Kyoto, demands that a country like Mexico, in its designation of developing country, would have to assume such a commitment. For better or worse, none of the treaties incorporates developing countries into the regime of commitments. I understand that approval of the law offered an opportunity to shine for the country before the Conference on Climate Change in Cancun. However, it also demonstrated the need to please above recognition of the   country’s realities and necessities.

The other factor that needs to be recognized is that it is absolute madness to assume a regime based on the elimination of carbon-based energy sources in a developing country with ample oil and gas resources. What’s necessary is a competitive regime -a true energy market- that would allow for the development of different types of energy and technologies to produce them, including, of course renewable. It is ludicrous to penalize the use of traditional sources of energy, perhaps the greatest source of comparative advantage that the country possesses, especially in these times that the price of natural gas could become an enormous competitive edge, source of growth, employment and inexpressible wealth. The proposed energy reform aims at liberalizing the domestic energy market and, to the extent that this project leads to a competitive framework, could lead to the flourishing of both traditional and renewable sources of energy. What makes no sense is to commit huge investments to alternative energy when an efficient market would do it at a much lower cost and in a manner that could foster economic growth. It is not by chance that nations such as China, Brazil and India have stayed on the sidelines: better for them to be criticized for not making a commitment than for not complying with them.

According to the Italian Bruno Leoni Institute**, the cost of creating one “green” job is equivalent to creating 6.9 industrial jobs. This rationale was what lead noted German environmentalist Fritz Vahrenholt to affirm that, in an era of austerity and restrictions on all fronts, “we’re destroying the foundations of our prosperity. In the end what we are doing is putting the German automotive sector at risk, the steel, copper and chemical sectors, silicon, you name it.” If one of the heroes of the Green Movement thinks this way, why should we be holier than thou?

The issue of the future is productivity because that is the principal source of competitiveness, a factor that attracts investment and allows for the generation of jobs that add more value, thus that pay better salaries and reduce energy consumption. There is no way of achieving this if we don’t adopt, as a country, a strategy devoted to raising productivity. As everyone knows, productivity implies doing more with less and for this conditions are required that make this possible. In the case of energy, the key lies in creating a competitive market, not massive government investments or paralyzing taxes.

Bjorn Lomborg, the environmentalist who abandoned the movement when he noticed that the cost of assuming the struggle against global warming was enormous in the face of how limited the potential was of achieving the desired objective, says that the greater part of the money invested in combating climate change –above all direct and indirect subsidies to the generation of renewable energy- constitutes a waste because even the most restrictive regimes in these matters have no chance of modifying the trends already in place. Faced with this, we would do well to devote ourselves to eliminating impediments to the growth of productivity, because it is from the latter that the income and the jobs that the country so greatly needs will materialize.