A Few Resources on the True Costs of Fossil Fuel-Based Energy

The following is my contribution to a comment thread on LinkedIn in which someone was attempting to argue that alternative energies, such as wind and solar, were not competitive with fossil fuels. It appeared he had not studied economics, as he did not understand the long-recognized externalities associated with fossil fuel-based energy.

---my comment below---

To analyze the net cost of renewable energies like wind and solar versus the net costs of fossil hydrocarbon-based energy, one must account for the negative externalities of carbon-based energy that are not reflected in the market price, as well as the billions of dollars of direct subsidies the fossil energy sector receives that both artificially depress the market price and cause alternatives to appear high by comparison. When those factors are accounted for in economic analyses, renewables achieve parity with or even become more attractive than fossil fuels. Following are a number of elucidating resources:

• Resources for the Future, "The True Cost of ElectricPower"
• International Monetary Fund, "Energy SubsidyReform"
• Skeptical Science on subsidies 
• Skeptical Science, "The True Cost of Coal Power" 
• What's the Real Cost of Fossil Fuels

A number of recent analyses demonstrate that decarbonising the economy will be less costly than continuing to rely on fossil fuels, and that the longer we delay the transition, the costlier it will become:

• Energy Technology Perspectives 2014 
• The International Energy Agency's World Energy Outlook; also discussed by Joe Romm here. A key conclusion of the IEA is that “Delaying action is a false economy: for every $1 of investment in cleaner technology that is avoided in the power sector before 2020, an additional $4.30 would need to be spent after 2020 to compensate for the increased emissions.”
• IPCC's 2014 Mitigation Report described here by Joe Romm 
• A Climate Risk Assessment for the United States, the Risky Business project chaired by Henry Paulson, Michael Bloomberg and Thomas Steyer mentioned by Andrew Winston in his piece.

One may think of the transition from a fossil energy economy to a decarbonised energy economy as an example of Schumpeterian "creative destruction." No doubt, such transitions are not painless, especially in this case of more than a century's worth of legacy fossil fuel infrastructure and fossil carbon-based economic development. And there will be losers and winners. But the growing body of scientific evidence of global warming and the many economic/risk analyses have informed our understanding to the point where we know with high certainty that embracing that transition now, while not entirely painless, will be far less costly and painful than waiting to embrace it later. We also know that the market's failure to reflect the externalities of fossil fuels in the market price of fossil energy, together with price- and behavior-distorting subsidies, are contributing to that delay. As Andrew points out above and at greater length in his book The Big Pivot, companies such as Wal-Mart, IKEA, Nestle, Ford, Unilever, Rio Tinto, HP and many others, are not waiting. They are already strategically implementing alternative energy, eco-efficiency and sustainability plans. And they are finding it profitable and competitively advantageous to do so.

My comment on a bad climate piece

A friend shared a climate piece on my facebook and asked for my take. The piece is titled "Why Climate Change Doesn't Scare Me". My comment follows:

There is so much the author gets wrong in that piece that if I were to correct every falsity, every incorrect assertion of science, every flawed premise, every ideologically motivated conclusion, every instance of a myth, misconstruction, or misunderstanding that has been debunked, and every example of motivated reasoning, and if I included references to support each rebuttal point—unlike this author who provides not one citation—the result likely would be a paper at least twice as long as this person’s original piece. It would require hours of my time. He gets almost nothing correct. And that’s not an exaggeration; literally, every paragraph is riddled with errors. Am I surprised? No. I’ve seen this kind of piffle time and again. Authors like this use sciencey words and sciencey-sounding reasoning to portray themselves as scientifically literate at some level. But by the number of things they get wrong they reveal not just how basic that level truly is, but how large the disparity is between their zones of competence: think of 2 concentric circles, a small inner circle representing what one knows surrounded by a larger outer circle representing what one thinks he knows. What frustrates me is that the amount of actual science freely available to anyone with a browser and internet connection is immense. For free one could educate himself, thus expanding his circle of competence and (hopefully) contracting the circle of what he thinks he knows. Great places to start are skepticalscience.com, Gavin Schmidt’s realclimate.org, climate.nasa.gov, the IPCC Assessment Reports (even the relatively short Summaries for Policymakers), and the National Climate Assessment. And I must suppress my urge to fact-check every instance of error, lest I spend an entire day drafting a rebuttal the educational value of which would be nil because authors of pieces like this tend to be rigidly ideological and epistemically closed.

A couple other points. Regardless of one’s political identification as libertarian, conservative or liberal, no one is “forced” to declare anything. The science says what the science says; one can learn it, evaluate it, question it, and propose and test alternative theories and submit his findings for scrutiny by the scientific community. That’s how science works. Unfortunately, one’s a priori heuristics, biases, and political disposition do affect how he or she views the science. A fair amount of scholarly research has been done on that front, including Yale’s Dan Kahan if I'm not mistaken. Our scientific understanding of the climate--past, present and future--has been building since the early 1800s beginning with the Frenchman Fourrier and continuing through the 19th century with the Englishman Tyndall and the Swede Arrhenius. One can read about them here. The climate-related changes to the physical and biological systems described in the IPCC reports are based on more than 29,000 data series, selected from a larger universe of almost 80,000, 90% of which point in the direction of anthropogenically-caused warming. Taking a skeptical stance when viewing anything, including the climate issue, is healthy. But when someone like the author of the piece above is so dismissive in the face of 200 years of science and such a mountain of evidence, it probably would be prudent to be at least as skeptical of him.

Lastly, whether by a carbon tax or by a cap-and-trade mechanism, pricing fossil hydrocarbons is warranted. Fossil hydrocarbon emissions are attended by well-known negative externalities that are not accurately reflected in the price we pay for them, from human health morbidity/mortality and environmental/ecological degradation to global warming/climate change. In the market, things that are underpriced get overused, as we’re doing with fossil hydrocarbons. Why are they underpriced and overused? Without writing a separate lengthy economic discourse, which I could, in short it’s because the atmosphere is a “commons”, and the classic commons problems occur. Putting a price on carbon, either by a carbon tax or a cap-and-trade mechanism, both of which have their advantages and disadvantages, is a means to overcome the market failure produced by the commons problem.

As for the terms “climate change” and “global warming”, one can use them interchangeably. The globe is in fact warming—lower troposphere, upper ocean (0-700m), deep ocean (below 700m), cyrosphere. We can measure and observe that. We have and we continue to. We can evaluate the factors that produce it: Milankovich cycles; internal variability (e.g., La Niña and El Niño); total solar irradiance; volcanoes; land use, forestry/deforestation and agriculture; and human emissions of GHGs. Climate is in fact changing. Even this past winter’s snowfall and cold temps in the mid-latitudes of North America (while the rest of the world was warmer on average, by the way, and Australia’s summer was a record-breaker) are being attributed to increased temps over the Arctic that caused big, prolonged dips in the jet stream’s Rossby waves and allowed the Polar vortex to dip into those latitudes (an area of research somewhat new, but on the forefront of which is Jennifer Francis at Rutgers). Notably, the “climate change” versus “global warming” terminology choice can be traced to Republican pollster Frank Luntz’s 2002 memo.

We’ve just passed 400ppm CO2 in the atmosphere, the first time it has been that high in millions of years. It was 280ppm before the Industrial Revolution, a 43% increase. It’s been stable within about 240-300ppm over the pre-industrial eons in which human civilization developed. We’re on a path toward 500ppm and higher. The Relative Concentration Pathways (RCPs) depicted in the 2013 IPCC Working Group I Assessment Report show the projections of CO2 concentrations and temperature changes under various emissions scenarios. Looking at the RCPs, there is legitimate cause to be concerned, indeed alarmed, about where we’re heading. The Defense Department is taking the science of climate change seriously; the insurance industry is taking it seriously; the International Energy Agency is taking it seriously; companies are taking it seriously (see, e.g, The Big Pivot by Andrew Winston); and countries around the world are taking it seriously. About the only group in the world which, as a bloc, is not taking it seriously are Republicans in the United States who have chosen to embrace ignorance, unlearnedness, and anti-intellectualism as values over learnedness, enlightenment, and reason.