Fossil fuels provide great value, which we pay for, but also cause health problems and climate change, which generally are not included in the costs of fossil fuels. How important is this?
Economic analyses consistently indicate that reducing fossil-fuel use would be economically beneficial. The Nobel Prize in Economics in 2018 was given to William Nordhaus of Yale for building new types of models that provide guidance to policymakers and the public on optimal ways to distribute money among consumption now, broad investment to grow the economy and give future people the ability to solve problems, and targeted investment in issues such as climate change to reduce the problems that we leave for future people. Those models show that great improvements to the economy are available if we reduce fossil-fuel use efficiently.
A team working with the International Monetary Fund used these tools, and various other standard economic approaches, to estimate the costs to society of subsidizing fossil fuels. Some of this is direct subsidies such as tax breaks, but mostly it is the fossil-fuel damages we discussed above, from lost health and from climate change, that are not paid for by the fossil-fuel users. The International Monetary Fund group found that the subsidy for fossil fuels in 2015 was 6.5% of the world economy (gross domestic product), or $5.3 trillion. Seven years later, that had increased to $7 trillion, or 7% of the economy. As a rough approximation, for each dollar spent on fossil-fuel energy, society spends another dollar. Clearly, this varies with the costs of fossil fuels, and is higher for some countries and lower for others, but it is a useful first approximation. Governments almost always are involved with any large part of the economy, and there generally are taxes and subsidies scattered throughout the economy, but the size of this fossil-fuel subsidy dwarfs others. Note that the uncertainties mean that these fossil-fuel subsidies could be a little smaller, or a little bigger, or a lot bigger than stated here, but not a lot smaller.
Because the real cost of fossil-fuel energy is so high, there are strong economic reasons to move towards a sustainable energy system. Studies are repeatedly showing that with maybe 30 years of work, we can eliminate at least 90% and perhaps 100% of the global-warming emissions at a cost that is cheaper than continuing to rely on fossil fuels.
Again, we can guarantee that you can find heated arguments about everything we have written on this topic, and many things we have not written. We have tried to provide the best evidence. Dr. Alley has worked extensively with the United Nations Intergovernmental Panel on Climate Change, winner of the 2007 Nobel Peace Prize, as well as with the US National Academy of Sciences on some aspects of this, and has relied heavily on those sources and on other high-quality scholarship for the material presented here. Any energy transition will be a huge effort, and we don’t know in detail what really will be included in a sustainable energy system. But, the scholarship now really does show that this can be accomplished in ways that help the economy, increase employment, improve health and national security, and provide a better environment more ethically.
A few good sources
- For our note about the land area used for biofuels being able to supply all human energy use with renewables, start with Adeh EH, Good SP, Calaf M, Higgins CW. Solar PV Power Potential is Greatest Over Croplands. Sci Rep. 2019 Aug 7;9(1):11442. doi: 10.1038/s41598-019-47803-3. PMID: 31391497; PMCID: PMC6685942. They concluded that “Global energy demand would be offset by solar production if even less than 1% of cropland were converted to an agrivoltaic system.”
- This paper noted that roughly 4% of arable land is used for biofuels, Rulli, M., Bellomi, D., Cazzoli, A. et al. The water-land-food nexus of first-generation biofuels. Sci Rep 6, 22521 (2016). https://doi.org/10.1038/srep22521
- The International Monetary Fund estimate of fossil-fuel subsidies is from Coady, D., Parry, I., Sears, L., & Shang, B. (2017). How large are global fossil fuel subsidies?. World development, 91, 11-27; an update in 2023 was at https://www.imf.org/en/Publications/WP/Issues/2023/08/22/IMF-Fossil-Fuel-Subsidies-Data-2023-Update-537281
- To start learning about the economics of climate change and the value of moving away from fossil fuels, you might try William Nordhaus’ 2018 Nobel Prize lecture on the economics of climate change https://www.nobelprize.org/prizes/economic-sciences/2018/nordhaus/lecture/
- For temperature data, a good starting point is the NASA Goddard Institute for Space Studies GISTEMP site, with lots of graphics, raw data, and much more. https://data.giss.nasa.gov/gistemp/
- Probably the most important source on this topic is the United Nations Intergovernmental Panel on Climate Change, winner of the Nobel Peace Prize in 2007, at www.ipcc.ch Everything they do is open and archived, which is really wonderful, but means that there is a LOT of material. A useful starting point might be to look at the Summary for Policymakers of the Physical Science Basis of report, https://www.ipcc.ch/report/ar6/wg1/downloads/report/IPCC_AR6_WGI_SPM.pdf
- In addition to the Physical Science Basis, the IPCC provides reports on what climate change will do to us, and what we can do to reduce or eliminate our influence on the climate. Just the Summary of only the physical science section is 31 pages, so you can be sure there is a LOT of information there, assembled by the world’s scientists, in the public eye, working as volunteers, to provide guidance on climate.
- The US National Academy of Sciences and the Royal Society have some great resources at the National Academies of Science. Dr. Alley helped just a little with this one.