Rick Perry’s Blunder About Supply and Demand Reveals the Truth About Coal’s Future
Published by the Natural Resources Defense Fund
Rick Perry at last month’s “Unleashing American Energy” event
Simon Edelman, Energy Department/Flickr
“Here’s a little economics lesson: supply and demand.”
That’s how Energy Secretary Rick Perry teed up his latest headline-grabbing gaffe, which—like his previous gaffes—didn’t disappoint. In some ways, this may be his best work yet, combining equal amounts of smugness, hubris, pedantry, and utter wrongness: an Aesop’s fable for the Trump era.
The lesson came last week during a visit to a coal-fired power plant in West Virginia. In his attempt to paint coal’s future as a rosy one, despite all of the overwhelming evidence to the contrary, Perry said, “You put the supply out there, and demand will follow.” His audience may have clapped and cheered in approval, but economists—and indeed anyone who’s ever taken an Intro to Economics class at the high-school level or above—shook their heads in disbelief. Our current secretary of energy, the former governor of one of our biggest and wealthiest states, managed to get the law of supply and demand elegantly, almost perfectly backward.
Perry’s factual inaccuracy is obvious enough; the vast majority of economists agree that supply follows demand, not the other way around. But his words were also wrong on a moral level. Because even as signs point to the continued attenuation of coal as an energy source, others point to a corresponding rise of renewables in coal’s stead. And if he really had their best interests at heart, the energy secretary would have shared this information with those coal workers last week.
Perry told them what they wanted to hear. There’s nothing wrong with the coal industry that more production can’t fix! But what they needed to hear—and what they deserved to hear—was that our nation’s energy portfolio is changing rapidly, with coal accounting for less and less of U.S. annual energy production. According to the Energy Information Administration, coal production declined 19 percent between 2015 and 2016, the largest annual decline since 1978.
Production, in fact, has been declining steadily since 2008, partially as a result of the advent of cheap and abundant natural gas. But during this same span of time, technological developments have made solar and wind power easier to produce and more inexpensive. In more than 30 countries, these forms of energy are now just as cheap as—or even cheaper than—fossil fuels. This recent milestone, identified by the World Economic Forum, marks a turning point in the way that governments, economists, energy producers, utilities, and consumers have come to view renewables.
As recently as a few years ago, you could still hear skeptics and fossil fuel apologists arguing that transitioning to a renewable-energy economy was an environmentalist fantasy, that the hurdles of cost and scale were insurmountable. They’re not making those arguments anymore. Instead, our cities, our states, even our oil companies are making massive investments in clean energy. If Perry really wanted to give those coal workers some hope, he would have told them that as our nation’s energy portfolio changes, energy policy needs to be changing along with it. We need to be doing whatever we can to foster job growth and job security in the emerging clean energy economy, including training new employees in the mechanics and technologies of it—which may very well mean retraining coal workers who have already lost their jobs or will likely be losing them soon.
The law of supply and demand is very much at work in the way that the energy landscape is shifting before our eyes. But it’s not working in favor of coal, no matter how much Perry and others try to twist the precepts of the law to fit their outdated narrative. Demand drives supply, not the other way around. If energy consumers really wanted more coal, they’d be lining up to buy it, and the money they were willing to spend on it would be financing a huge and newsworthy coal renaissance.
But that isn’t happening. Across the board, and at every level, energy buyers are demanding cleaner and more sustainable alternatives to coal, the burning of which is directly implicated in the poisoning of our atmosphere (and our lungs and water) and the warming of our planet. That demand is spurring innovation and competition among producers as they vie to meet it. That, in turn, is increasing the supply. And as the supply of renewable energy grows and the means of distributing it improves, costs are coming down. Solar is now cheaper than coal in many parts of the world; within a decade, experts say, it’s likely to become the cheapest form of energy all around the globe.
In the end, it’s telling that the only way Rick Perry could cite the law of supply and demand in favor of increased coal production was by flipping it inside out. But laws don’t work that way.
onEarth provides reporting and analysis about environmental science, policy, and culture. All opinions expressed are those of the authors and do not necessarily reflect the policies or positions of NRDC. Learn more or follow us on Facebook and Twitter.
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