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Welcome to Dispatch Energy! Leaders love presenting a flawless future. They claim to have all the perfect answers, to know more than the experts, and to know precisely what they’ll do to fix the grievances of their constituents. Yet the word “utopia” comes from Greek and means “no place”—it does not exist. This reality doesn’t stop politicians from hawking the dream, and New York recently offered a reminder of what happens when political fantasy collides with actuality, this time in the arena of climate policy.
Following Donald Trump’s victory in 2016 and Vox’s declaration that planet Earth was the true “loser,” several blue states enacted climate laws they knew would not be adopted at the federal level. Among them was New York’s 2019 Climate Leadership and Community Protection Act. The statute aimed to cut greenhouse gas emissions by 40 percent below 1990 levels by 2030 and by 85 percent by 2050.
As 2030 approached, New York legislators decided earlier this year to drop the 2030 target and pursue alternative rollbacks of the measure. Not surprisingly, the state was finding it hard to meet its own ambitious benchmarks. The latest reporting indicates New York is only about 15 percent below its 1990 emissions level, making it very unlikely that the policy’s emissions-reduction ambitions will be achieved.
In New York and beyond, it is abundantly clear that attempts by politicians to squeeze the market into their preferred blueprint do not succeed. There is no escaping the truth that economics governs the balance between what is desirable and what is achievable. Yet the practice of selling the public on a plan that supposedly covers all contingencies has become a familiar feature of energy policymaking.
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</div>In 1979, amid one of that decade’s recurring energy crises, President Jimmy Carter delivered his famed “crisis of confidence” speech. The speech itself stands as a classic attempt to persuade voters that our nation’s ingenuity and can-do spirit can conquer any hurdle, and I frequently return to Carter’s phrasing because I can imagine many politicians repeating it word for word in today’s climate.
To safeguard our energy security, I’m calling for the most substantial peacetime commitment of funds and resources in our history to develop America’s own alternative sources of fuel—from coal, from oil shale, from plant-based fuels for gasohol, from unconventional gas, from solar energy. … Just as a comparable synthetic rubber program helped us win World War II, we will mobilize American resolve and capability to win the energy war.
History echoed Carter’s moment after Russia’s invasion of Ukraine in 2022, which pushed energy prices higher and prompted the U.S. government to pledge to “accelerate the clean energy transition” in reply. From a policy vantage point, the Biden administration tried to push this shift by requiring automakers to offer more electric vehicles and by enforcing stringent rules on fossil-fuel power plants. The Trump administration rolled back many of these policies, perhaps on the grounds that their failure to reduce prices gave them political cover. Yet the appeal of government-directed market interventions to ease energy costs remains as alive as ever.
Indeed, even as New York’s policymakers admit that their aggressive energy-transition plans were either impractical, too costly, or both, New York City demonstrates a steadfast commitment to pressing ahead. Mayor Zohran Mamdani, affiliated with the Democratic Socialists of America, is pushing not only hard emissions targets but also public ownership of energy production. This underscores a real tension between what voters want and what is realistically deliverable.
This issue isn’t inherently a left-versus-right clash, but rather a consequence of rising populism and a preference for central planning. Populists push a narrative that entrenched elites are blocking the public from realizing its full potential, a narrative that fits neatly into energy and environmental policy debates. In discussions about costs or pollution, it’s common for politicians to imply that their favored energy source would fix the problem.
Democrats blame Republicans for backing fossil fuels and serving special interests. Republicans counter that Democrats lean too heavily on subsidies and mandates for renewable energy. With this kind of rhetoric as the norm, both sides frequently advocate for policies that advantage their preferred energy forms. But populist remedies rarely deliver.
New York’s climate leadership law isn’t the only instance illustrating why trying to force specific energy outcomes is misguided. For years Germany experimented with a tax on electricity consumers—reaching nearly seven cents per kilowatt-hour in 2020—to subsidize clean energy growth. Yet the subsidy program faltered because transmission access and other obstacles, not capital shortages, limited growth. And the idea of public ownership of utilities isn’t new either. Puerto Rico’s electric utility was founded on the same principles—and has left a long trail of corruption and mismanagement in its wake.
These forms of politically driven energy market interventions are rooted in the deeply flawed notion of central planning, but their consequences are especially severe given the nature of energy production. In the United States, annual energy expenditures typically range in the trillions of dollars. The average household spends thousands each year. Building new energy infrastructure requires massive capital, and profit margins are often thin, meaning recouping investments can take many years.
And in the energy sector, market forces are not easily overridden by government actions. Even sizable subsidies do little to move the dial compared with the broader dynamics of supply, demand, and investment, and mandates cannot create investor confidence in multidecade infrastructure undertakings.
Still, it’s easy to see why the myth persists that government can simply mandate a desired energy outcome. Energy is costly, and much of its consumption involves pollution. It’s tempting to claim that a wealth of energy would be within reach if lobbyists and political clout were weaker, but the plain fact remains: the current energy market simply isn’t arranged to favor the politicians’ preferred path yet.
If, in upcoming electoral cycles, energy affordability becomes a bigger theme, policymakers would do well to ground their approach in economic fundamentals. If the aim is more clean energy and lower emissions, the focus should be on removing market-entry barriers—for instance, finally enacting permitting reform. If the goal is lower energy costs, it’s essential to foster competition (for example, by expanding competitive electric power markets rather than regulated monopolies and by preventing regulatory capture that protects incumbent producers).
Despite Carter’s lofty promises, the public didn’t rally to give him another chance, and Ronald Reagan defeated him in a landslide. Reagan immediately moved to remove energy price controls, arguing that freeing the market would bring prices down. Under his leadership, energy prices eventually settled, and the era-defining crises of the 1970s began to fade.
The distinction between Carter’s and Reagan’s approaches offers a lesson for any serious policymaker today—especially in this era of hollow populism: trust in markets, but beware of attempts to micro-manage them from the top down.
Policy Watch
- To align with President Donald Trump’s executive order aimed at boosting domestic production of critical minerals, the Army recently announced plans to lease land to four mining companies for processing these minerals. Last year, Trump directed the federal government to use available authorities to “facilitate domestic mineral production to the maximum possible extent,” and the Army now seeks to advance that goal by leasing “underutilized” land at its facilities. While such an arrangement could speed up permitting timelines for these facilities, as I argued in previous Dispatch Energy editions, selectively directing government preference can undercut the benefits of competitive markets.
- In its push to build 10 large-scale commercial nuclear reactors, the Department of Energy recently offered conditional loan commitments totaling $17.5 billion to five eligible projects. In announcing the program, Energy Secretary Chris Wright claimed the loans would speed construction by as much as three years. Critics of heavy nuclear subsidies have long warned that such government interventions distort incentives. There may be direct advantages for subsidized projects, but these policies shift costs to taxpayers while eroding the gains from competition.
Further Reading
- A recent report from the MIT Center for Energy and Environmental Policy Research examines future U.S. power-sector emissions following the removal of clean energy subsidies. The study finds that even without subsidies, 74 percent of clean energy capacity would still be built, and 67 percent of emissions reductions would still be achieved. These findings align with R Street’s 2022 projections, which suggested that two-thirds of subsidized clean energy output would occur absent subsidies. MIT’s results reinforce a long-standing insight: subsidies add limited climate benefit because clean energy is already profitable without them, and barriers to market entry, notably permitting, remain the bottleneck for growth.
