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Thursday, January 31, 2013

What is the cost of not using renewable energy?

Frequent readers of this blog (there are a few of you) know that I often write about new studies. They’re usually voluminous and sometimes chock full of ugly equations sending those that click through hyperlinks hurriedly scrolling to find the executive summary.

But today I’m noting something a little different – a 10-page study.  And that’s including the bibliography.

I found this by reading David Roberts, writing in Grist. Roberts reports on a “clever” new study from Germany’s World Future Council.  The study - The Monetary Cost of the Non-Use of Renewable Energies- A First Study - attempts something novel – quantifying the financial costs of not using renewable energy.

The idea is pretty simple. When we use finite fossil fuels to generate energy, rather than the inexhaustible, renewable alternatives, we make those fossil fuels unavailable for non-energetic uses (think petrochemicals) in the future. In other words, when we burn fossil fuels for energy, we are needlessly destroying valuable industrial capital stock…

Here’s the conclusion:

Protecting the use of increasingly valuable fossil raw materials for the future is possible by substituting these materials with renewables. Every day that this is delayed and fossil raw materials are consumed as one-time energy creates a future usage loss of between 8.8 and 9.3 billion US Dollars. Not just the current cost of various renewable energies, but also the costs of not using them need to be taken into account. [my emphasis]

Got that? Every day we use fossil fuels for energy, we steal $9 billion from future people who will need those fossil fuels for non-substitutable industrial uses.

The exact numbers here are, like numbers in all economic modeling, probably going to turn out to be wrong. [It is, as the authors state explicitly, a first study – JQ.] My guess is they are on the low end, but there are so many assumptions required that, really, who knows.

Roberts points out that the paper highlights an important conceptual point.  The costs of shifting to more sustainable practices and technologies usually dominate analytical approaches:

But the choice is not costs or no costs: the status quo carries costs too. Every day we stick with the status quo, we are increasing the costs our descendants will pay for the inevitable, unavoidable transitions to more sustainable systems. (Relatedly: the cost of reducing carbon emissions enough to avoid catastrophic warming rises every year.)

The question is not costs or no costs, but about the balance of costs and benefits, and perhaps more importantly, who pays the costs and who receives the benefits. Right now we are imposing huge and growing costs are our descendants in exchange for temporary, unsustainable benefits today. That is the farthest thing from “fiscal conservatism.”

Worth thinking about.  Hard.

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