December 22, 2022

Does Anyone Remember the Green New Deal?

The Green New Deal was put forth on Feb 7, 2019, as House Resolution 109. It wasn’t just about clean energy. It was also about environmental justice, income inequality, job creation, access to health care, affordable housing, etc. (www.congress.gov)

While it was widely criticized as being too broad and lacking specifics, it was my view that the environmental lobby was simply trying to expand its support base by appealing to other issues important to voters. For example, most parents with young school children probably worry more about the safety of the classroom than an increase in global temperatures of 2 degrees over the next 50 years. In that way, I thought it was smart politics.

Fast forward nearly four years, and events have turned the situation on its head. Today’s expensive energy has unleashed full-throated calls from both sides of the aisle for more investment in all sources of energy to make it affordable and reliable. Clean would be nice too.

Some would say that the Bipartisan Infrastructure Law (BIL) signed into law on November 15, 2021, and the more recent Inflation Reduction Act are the offspring of the Green New Deal. Legislative support for domestic content and union labor as well as generous renewable energy subsidies support that view. But something happened along the way to make these policies far more all-of-the-above than the Green New Deal suggested–the need to get a majority in the US Congress to vote “yes.” And in the Senate that means 60 votes to avoid a filibuster. The BIL got 69.

Getting to ‘yes” meant pleasing constituents in states where conventional energy provides lots of jobs and tax revenue. Increasing the tax credit on captured CO2, establishing a floor price for electric power sold by existing nuclear plants, carving out about half of the money that would have gone to renewables for “clean energy” with zero emissions, etc. All these show the influential hand of conventional energy lobbying.

That influence has of course grown now that conventional energy is in such short supply. We have written extensively on why shareholders (who collectively took away the industry’s credit card) are the cause of this shortage. But what’s also interesting from an investor viewpoint is how the world has changed its tune about conventional energy. Two years ago, it was a sunsetting industry. Now, governments are pleading for more oil and gas capacity. Public and investor sentiment for conventional energy has also noticeably ticked up.

More broadly, of course, It’s the results that matter. The U.S. has become a major exporter of oil and gas. Our nation has lowered its carbon emissions since their 2007 peak by more than the entire European Union. We have the cheapest electricity in the OECD (Organisation for Economic Co-operation and Development). And importantly, the U.S. is a leader in energy technologies of all types from nuclear to renewables to the shale revolution that broke the myth of “peak oil.” Europe take note.

As was said many years ago, “America will always do the right thing – after exhausting all the alternatives.” (quoteinvestigator.com) The beauty of that quote is that it captures the messy process of a representative democracy based on an elegantly simple constitution that both creates and constrains a society within which private capital can be profitably deployed to the benefit of both its owners and the public at large. The quick evolution of the Green New Deal into a set of energy policies that embraces “all of the above” is indeed that messy process in action.

As a non-indexing, active investor, and as an American, I love the mess.

Happy Holidays,

Energy Income Partners

The above is Energy Income Partner LLC’s (EIP) opinion, and such opinions may change without notice or duty to update. The information is based on data obtained from third party publicly available sources that EIP believes to be reliable, but EIP has not independently verified and cannot warrant the accuracy of such information. Discussion relating to third party funds is provided solely for informational purposes only. The information provided above is not an offer to purchase or sell or a solicitation to purchase or sell a particular security or groups of securities. There is no guarantee that any securities held, or sectors represented in, any fund/account managed by EIP will not overlap with those third-party funds or indices. Discussions regarding specific companies are for illustrative purposes only and should not be considered as representative of any portfolio or portfolio holding contained in accounts or funds managed by Energy Income Partners, LLC nor should it be construed as a recommendation or an offer to purchase or sell or solicitation of a purchase or sale of a particular security.

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