I recently read a wonderful article written by Ralf Sigrist of Nordex USA on the myth of cheap fossil fuels and again, it got me thinking. The National Research Council (NRC) recently released its’ report The Hidden Costs of Energy Production which has led to some debate.
In this report, the NRC estimates that the hidden costs of energy production and use in 2005 were $120 billion. These costs, known to economists and external costs or externalities, include the economic impacts of health costs, air pollution, reduced crops, reduced quality of life, and other less obvious expenses.
On top of these externalities, in the article from Nordex’s Ralf Sigrist the author argues, “The Environmental Law Institute has calculated $70 billion in subsidies for fossil fuels in the period of 2002-2008, in the form of tax breaks, direct spending and even health care costs, like the treatment of black lung disease for coal miners. If those subsidies were to vanish, shock waves would surely shake the nation out of its energy apathy, and we would understand the value of a kilowatt-hour. Renewable alternatives like wind would suddenly look like a bargain deal.”
So, to follow up on Mr. Sigrists thoughts, I wanted to see just how much impact the $70 billion has on the energy prices we as consumers pay. So, without going into too much detail on the subject, according the the U.S. Energy Information Administration during the time period from 2002-2008, the United States consumed $5.9 trillion of fossil fuel energy (this statistic came from a compilation of numerous reports of which can all be found throughout the Energy Information Administrations website).
Assuming the given information is correct, this really puts the $70 billion and $120 billion numbers into perspective. Even if we as ratepayers/consumers were to take on the additional $70 billion of government subsidies, it would only increase the average cost of fossil fuels by 1.18%. Additionally, if we were to add the estimated $120 billion/year of external fossil fuel costs to the mix, we would see a 15.39% increase in the cost of fuel.
As I look at these numbers, it’s quite apparent to me (and hopefully you) that renewable energy prices really are competitive with those of fossil fuels, and as such I strongly support national regulations that will help us realize the true costs of fossil fuel and the true benefit of renewable energy sources.
I look forward to your thoughts and/or comments on the matter and I am happy to discuss any questions as to the source of the all but clearly defined data.