Friday, September 16, 2011


Some question the push to subsidize and adopt green forms of energy, such as solar photovoltaic and wind turbines. The challengers suggest that green power cannot produce enough energy to replace fossil fuels, would cost too much to use, and has too many problems associated with its production and distribution. But virtually all of those problems boil down to costs - green energy costs more than dirty fossil fuels. Rick Martinez summarized much of this in the Raleigh News and Observer on September 14, 2011 in an article entitled "Green energy more hype than help."

The flaw in Mr. Martinez' reasoning is a failure to take into account the external costs of burning coal and gasoline. External costs for coal and gasoline are things that burning coal and gasoline cause that cost real money to fix but that are not included in the up-front cost (internal costs) of purchasing that fuel.

For example, extracting coal by removing a mountaintop in West Virginia causes deforestation and massive water pollution. However, the mountaintop and the forests are not replaced and the water pollution is not cleaned up. Moreover, your electricity bill includes no funds to compensate those living near or downstream from that missing mountaintop for their resulting expenses.

For example, burning gasoline releases nitrogen oxides and hydrocarbons that cause ozone air pollution. That ozone air pollution has demonstrable health impacts that raise healthcare costs and damage people's health and fitness. Those healthcare costs are not paid for by the oil companies and are not part of the price of a gallon of gasoline.

Let' s be clear. External costs must be paid for, are paid for, one way or the other. It's just that external costs are not included in the price of the fuel whose extraction and use caused them to occur. They should be part of the cost of those fuels, but historically they have not been, and that continues today.

Solar photovoltaic and wind turbines both represent renewable alternatives to nonrenewable and polluting fossil fuels. Although solar and wind power generation have their own environmental costs, they clearly produce little to no air pollution, greenhouse gases, water pollution, or environmental health dangers. Solar photovoltaic and wind turbines have few external costs that result from their use.

So any comparison of the costs of producing electricity with coal to producing it with solar or wind is way off base if it does not include the difference in external costs of the two energy sources. Any comparison of the relative costs of running a car on gasoline versus electricity falls short if it does not include the external costs of burning gasoline that simply don't exist for producing electricity with solar or wind power.

Just how expensive are those external costs? The National Research Council of the U.S. National Academy of Sciences recently estimated the hidden costs of energy production and use at $120 billion per year. Dr. Paul Epstein of the Harvard Medical School recently estimated the external costs for coal alone at from $175 to $500 billion per year.

For comparison, from 2007 to 2010, government subsidies supporting renewable energy sources jumped 186%, from $5 billion to $15 billion, this largely due to the government's recent economic stimulus bills. That 2010 figure of $15 billion represents just 12% of the low-end estimate of $120 billion per year in external costs of continuing to use fossil fuels.

We could subsidize renewable energy sources at a rate five times higher than the 2010 figure and they would still be much cheaper than fossil fuels!

This is why renewable energy sources must be subsidized - to make up for the unfair advantage fossil fuels have by not having to pay for their external costs. Renewable energy sources have few if any external costs. Until fossil fuels are forced to pay for their external costs, any comparison between the costs of fossil fuels and renewable energy is simply propaganda for the fossil fuel industry.

How could those external costs be paid up front by fossil fuels? The direct and simplest way is a carbon tax. Charge enough to pay for the damages the fuel causes. Take those funds and use them to reduce income taxes by a like amount, and you could have an overall revenue-neutral or tax-neutral tool that would even the playing field between fossil fuels and renewable energy.

With a tax on carbon, consumers would pay the true costs of using coal-generated electricity and driving gas-guzzling cars. Those who wished to save money on their fuel bills would lead the charge to renewable energy, such as solar photovoltaic and wind power. Power companies and car companies would get the message that consumers want efficient clean-energy alternatives, since renewable energy is, in fact, cost-competitive with fossil fuels.

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