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.