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Energy Darwinism: The Case for a Level Playing Field

by John Brian Shannon

Energy Darwinism = Leveling the Subsidy Playing Field

By now, we’re all aware of the threat to life on this planet posed by our massive use of fossil fuels and how we might attempt to reduce the rate of CO2 increase in our atmosphere.

Energy Darwinism can solve all our energy-related infrastructure and national security problems while increasing GDP, by lowering the cost of energy to corporations, consumers and governments.

Energy Darwinism - Global Energy Subsidies (2014, in billions USD)Both divestment in fossil fuels and reducing fossil fuel subsidies attempt to lower our total CO2 emissions by reducing fossil fuel industry revenues; While a carbon tax attempts to lower our total CO2 emissions via increased costs to energy producers and consumers.

But a revenue-neutral solution (from the oil industry perspective) would work to lower CO2 emissions by ramping-up renewable energy subsidies on a per-unit-of-energy basis to match existing fossil fuel subsidies.

So far, there are no fossil fuel lobby groups dedicated to preventing renewable energy from receiving the same per unit of energy subsidies as the fossil fuel industry receives, and has been receiving since 1918 in the United States.

Imagine how hypocritical the industry would look if it attempted to block renewable energy subsidies that were exactly matched to fossil fuel subsidies.

Were governments to decide that renewable energy would receive the same annual subsidies as the fossil fuel industry, a number of things would begin to happen;

  • Cleaner air in cities
  • Lower CO2 emissions
  • Less imported foreign oil
  • Lower unemployment rates
  • Dirtiest fossil projects canceled
  • Sharp decline in healthcare costs
  • Democratization of energy through all economic quintiles

Summary

Even forgetting for a moment the externality costs of fossil fuels (up to $2 trillion per year) the annual $548 billion in subsidies for fossil fuels promotes an unfair marketplace advantage.

But instead of punishing the fossil fuel industry for supplying us with reliable energy for decades (by taking away ‘their’ subsidies) or by placing the burden of a huge carbon tax (one that reflects actual fossil fuel externality costs) I suggest that we match the renewable energy subsidy to the fossil subsidy on a per-unit-of-energy basis… and let both compete on a level playing field in the international marketplace.

Assuming a level playing field; May the best competitor win!

By matching renewable energy subsidies to fossil fuel subsidies, ‘Energy Darwinism’ will reward the better energy solution

My opinion is that renewable energy will win hands down and that we will exceed our clean air goals over time — stopping global warming in its tracks.

Not only that, but we will create hundreds of thousands of clean energy jobs in the process and accrue many other benefits during the transition to renewable energy, as per the German experience. We will also lower healthcare spending, agricultural damage, and lower damage to steel and concrete infrastructure from acid rain caused by burning fossil fuels.

In the best-case future: Oil & Gas companies will simply become known as Energy companies

Energy Darwinism will reward investors who migrate from fossil fuel to renewable energy within the same energy company.

At the advent of scheduled airline transportation nearly a century ago, smart railway companies bought existing airlines or created their own airlines and kept their traditional investors and gained new ones.

Likewise, smart oil and gas companies should now buy or create renewable energy companies and keep their traditional investors and gain new ones.

That thinking represents the best energy future for energy producers and energy consumers.


Related Articles:

Air Pollution Costs the West Almost $1 Trillion Yr

Air Pollution Costs the West Almost $1 Trillion Annually
by John Brian Shannon John Brian Shannon

Air pollution has a very real cost to our civilization via increased healthcare costs, premature deaths, lowered productivity, environmental degradation with resultant lowered crop yields, increased water consumption and higher taxation.

However, air pollution is only one cost associated with fossil fuel use.

Smokestack Image Credit: Alfred Palmer
Smokestack image credit: Alfred Palmer

There are three main costs associated with energy

  1. The retail price that you pay at the gas pump or on your utility bill for example (which is paid by consumers)
  2. The subsidy cost that governments pay energy producers and utility companies (which is ultimately paid by taxpayers)
  3. The externality cost of each type of energy (which is paid by taxpayers, by increased prices for consumers, and the impact on, or the cost to, the environment)

Externality cost in Europe and the U.S.A.

A recent report from the European Environment Agency (EEA) states that high air pollution levels (one type of externality) in the EU cost society €189 billion every year and it’s a number that increases every year. (That’s $235 billion when converted to U.S. dollars)

To put that number in some kind of context, the cost of the air pollution externality in the EU annually, is equal to the annual GDP of Finland.

Let’s state that even more clearly. The amount of taxation paid by EU taxpayers every year to pay for airborne fossil fuel damage is equal to Finland’s entire annual economic output!

It’s getting worse, not better, notwithstanding recent renewable energy programs and incentives. Even the admirable German Energiewende program is barely making an impact when we look at the overall EU air quality index.

Of the 30 biggest facilities it identified as causing the most damage, 26 were power plants, mainly fueled by coal in Germany and eastern Europe. — Barbara Lewis (Reuters)

That’s just Europe. It’s even worse in the U.S., according to a landmark Harvard University report which says coal-fired power generation alone costs the U.S. taxpayer over $500 billion/yr in externality cost.

Each stage in the life cycle of coal—extraction, transport, processing, and combustion—generates a waste stream and carries multiple hazards for health and the environment. These costs are external to the coal industry and thus are often considered as “externalities.”

We estimate that the life cycle effects of coal and the waste stream generated are costing the U.S. public a third to over one-half of a trillion dollars annually.

Many of these so-called externalities are, moreover, cumulative.

Accounting for the damages conservatively doubles to triples the price of electricity from coal per kWh generated, making wind, solar, and other forms of non fossil fuel power generation, along with investments in efficiency and electricity conservation methods, economically competitive.

We focus on Appalachia, though coal is mined in other regions of the United States and is burned throughout the world.” — Full Cost Accounting for the Life Cycle of Coal by Dr. Paul Epstein, the Director of Harvard Medical School Center for Health and the Global Environment, and eleven other co-authors

The report also notes that electricity rates would need to rise by another .09 to .27 cents per kilowatt hour in the U.S. to cover the externality cost of American coal-fired electricity production.

The externality cost for solar or wind power plants is zero, just for the record

Dr. Epstein and his team notes: “Coal burning produces one and a half times the CO2 emissions of oil combustion and twice that from burning natural gas (for an equal amount of energy produced).”

There’s the argument to switch from coal to natural gas right there

Also in the Harvard report in regards to the intrinsic inefficiency of coal:

Energy specialist Amory Lovins estimates that after mining, processing, transporting and burning coal, and transmitting the electricity, only about 3% of the energy in the coal is used in incandescent light bulbs.

…In the United States in 2005, coal produced 50% of the nation’s electricity but 81% of the CO2 emissions.

For 2030, coal is projected to produce 53% of U.S. power and 85% of the U.S. CO2 emissions from electricity generation.

None of these figures includes the additional life cycle greenhouse gas (GHG) emissions from coal, including methane from coal mines, emissions from coal transport, other GHG emissions (e.g., particulates or black carbon), and carbon and nitrous oxide (N2O) emissions from land transformation in the case of MTR coal mining.” — Full Cost Accounting for the Life Cycle of Coal report

It’s not like this information is secret. All European, American, and Asian policymakers now know about the externality costs of coal vs. renewable energy. It’s just that until recently everyone thought that the cost of switching to renewable energy, was higher than the cost of fossil externalities.

It’s not only an economic problem, it’s also a health problem

Air pollution impacts human health, resulting in extra healthcare costs, lost productivity, and fewer work days. Other impacts are reduced crop yields and building damage.

Particulate matter and ground-level ozone are two of the main pollutants that come from coal.

90% or more of Europeans living in cities are exposed to harmful air pollution. Bulgaria and Poland have some of the worst pollution of the European countries.

An estimated 400,000 premature deaths in European cities were linked to air pollution in 2011. — CleanTechnica

Externality cost in China

Remember the Beijing Olympics where the city’s industry and commercial business were shut down to allow visitors and athletes to breathe clean air during their stay (and Wow!) look at their clear blue sky for the first time in decades. Great for tourists! Bad for Beijing business and industry, with the exception of the tourism industry (for one month) of course.

The Common Language Project reported in 2008 that premature deaths in China resulting from fossil fuel air pollution were surpassing 400,000 per year.

China faces a number of serious environmental issues caused by overpopulation and rapid industrial growth. Water pollution and a resulting shortage of drinking water is one such issue, as is air pollution caused by an over-reliance on coal as fuel. It has been estimated that 410,000 Chinese die as a result of pollution each year. — clpmag.org

The die is cast since it is becoming common knowledge that renewable energy merely requires a small subsidy to assist with power plant construction and grid harmonization — while fossil fuels continue to require truly massive and ongoing subsidies to continue operations.

Subsidy cost of fossil fuels

Already there is talk of ending fossil fuel subsidies, which in 2014 will top $600 billion worldwide

Want to add up the total costs (direct economic subsidy and externality cost subsidy) of fossil fuels?

Add the $600 billion global fossil fuel subsidy to the to the $2 trillion dollars of global externality cost and you arrive at (approx) $2.5 trillion dollars per year. Then there is the more than 1 million premature deaths globally caused by air pollution. All of that is subsidized by the world’s taxpayers.

Compare that to the total costs of renewable energy. Well, for starters, the economic subsidy dollar amount for renewable energy is much less (about $100 billion per year globally) and there are no externality costs.

No deaths. No illness. No direct or related productivity loss due to a host of fossil fuel related issues (oil spills, coal car derailment, river contamination, explosions in pipelines or factories) for just a very few examples.

The fossil fuel industry is a very mature industry, it has found ways to do more with ever-fewer employees, and it gets more subsidy dollars than any other economic segment on the planet.

By comparison, the renewable energy industry is a new segment, one that requires many thousands of workers and it gets only relative handfuls of subsidy dollars. And, no externalities.

It becomes clearer every day that high-carbon fossil must be displaced by renewable energy

No longer is it some arcane moral argument that we should switch to renewables for the good of the Earth; Fossil fuel is proving to be a major factor in human illness/premature deaths, it sends our money abroad to purchase energy instead of keeping our money in our own countries, and the wholly-taxpayer-funded subsidy cost of fossil is out of control and getting worse with each passing year.

The time for dithering is past. It’s time to make the switch to renewable energy, and to start, we need to remove the worst polluting power plants from the grid (and at the very least, replace them with natural gas powered plants) or even better, replace them with hybrid wind and solar power plants.

To accomplish this, governments need to begin diverting some of the tens of billions of dollars annually paid to the fossil fuel industry to the renewable energy industry.

Germany’s Energiewende program was (and still is) an admirable first step. Once Germany has completed it’s energy transition away from oil, coal and nuclear — having replaced all of that generation capacity with renewable energy and natural gas, only then can it be hailed a complete success — and German leaders should go down in history as being instrumental in changing the world’s 21st century energy paradigm.

Dank an unsere deutschen Freunde! (With thanks to our German friends!)

If only every nation would sign-on to matching or exceeding the ongoing German example, we wouldn’t have 1 million premature deaths globally due to fossil fuel burning, we wouldn’t have almost 2 trillion dollars of externality cost, we wouldn’t need $600 billion dollars of direct subsidies for fossil fuel producers — and we would all live in a healthier environment, and our plant, animal, and aquatic life would return to their normally thriving state.

Taxes would reflect the global $2.5 trillion drop in combined fossil fuel subsidy and fossil fuel externality costs, employment stats would improve, productivity would increase, the tourism industry would receive a boost, and enjoyment of life for individuals would rebound.

It’s a truism in the energy industry that all energy is subsidized, of that there is no doubt. Even renewable energy receives tiny amounts of subsidy, relative to fossil.

But it is now apparent that over the past 100 years, getting ‘the best (energy) bang for the buck’ has been our nemesis. The energy world that we once knew, is about to change.

The world didn’t come to an end when air travel began to replace rail travel in the 1950’s. Now almost everyone travels by air, and only few travel by train. And what about the railway investors didn’t they lose their money when the age of rail tapered-off? No, they simply moved their money to the new transportation mode and made as much or more money in the airline business.

Likewise, the world will not come to an end now that renewable energy is beginning to displace coal and oil. Investors will simply reallocate their money and make as much or more money in renewable energy.

Subsidy wars: Fossil Fuels vs. Renewable Energy [INFOGRAPHIC]

US fossil fuel subsidies vs. renewable energy subsidies
U.S. fossil fuel subisidies vs. U.S. renewable energy subsidies.

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Planetary Energy Graphic

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U.S. Energy Subsidies

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U.S. Jobs by Energy Type

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Energy Water Useage

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U.S. Energy Rates by State

Click here to enlarge the image and see the data for each state in the U.S.A.

Our energy comes from many sources, including coal, natural gas, nuclear and renewables.

As nonrenewable sources such as coal diminish due to market forces and consumer preference, the need for renewable energy sources grows.

Some U.S. states satisfy their growing renewable energy needs with wind, solar and hydropower.

Wind: Texas has the capacity to generate 18,500 megawatts hours of electricity through wind, and expects to add another 5,000 megawatts of wind generation capacity from facilities under construction.

Solar: California’s solar farms and small-scale solar power systems have 14,000 megawatts of solar power generating capacity.

Hydroelectric: Washington state hydroelectric power produces two-thirds of its net electricity.

Information courtesy of ChooseEnergy.com

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C40 Cities Initiative

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A Living Wage

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