1 – The Basic Science 2 – The Skeptic Debate 3 – The Expected Consequences 4 – The Solution 5 – A Letter to Your Grandchildren Acknowledgments To Learn More
“We have many advantages in the fight against global warming, but time is not one of them. Instead of idly debating the precise extent of global warming, or the precise timeline of global warming, we need to deal with the central facts of rising temperatures, rising waters, and all the endless troubles that global warming will bring. We stand warned by serious and credible scientists across the world that time is short and the dangers are great.”
—Senator and Republican presidential candidate John McCain, May 12, 2008 (speech at Vestas Wind Energy Training Facility in Portland, Oregon)
I hope that by this point in the book, you’ll understand and agree with the statement above by Senator John McCain. Moreover, while some people may debate Senator McCain’s degree of conservatism, the fact that he won the Republican nomination for president should once again make clear that the science of global warming is not a partisan issue.
Of course, the fact that people of all political persuasions can agree on the nature of the problem does not necessarily mean that everyone will agree on the best way to solve it. A discussion of potential solutions therefore takes us away from the “pure science” focus of the previous chapters and into areas that are more a matter of opinion. For that reason, I’ll admit to having had some reluctance about including this chapter in the book, because I can’t defend everything in it with the same high level of evidence that I’ve presented in previous chapters. However, I also recognized that if I stopped at the end of the prior chapter, I would have been leaving you with lots of reasons to be concerned about the future without having given you any cause for great hope. And personally, I am very hopeful and optimistic about our future.
So with some trepidation about sharing my personal opinions in a book primarily focused on science, I’ll go ahead and explain why I am so optimistic. I’ve already mentioned the basic reason in the introduction (see my third goal on page 2): I believe that if we go about this in the right way, there is a solution to all the problems of global warming that will not only protect the world for our children and grandchildren, but actually lead us to a stronger economy, with energy that is cheaper, safer, cleaner, and more abundant than the energy we use today. Moreover, I believe this solution can appeal to people across the political spectrum, and its “win-win” nature means it could even appeal to those few people who still don’t believe we face a real threat (figure 4.1). After all, who can argue against something that alleviates the risks of global warming while also improving our economy and our lives?1 In the rest of this chapter, I’ll focus on technologies that can offer us replacements for the fossil fuels that cause global warming, on what I believe to be the major obstacle that has prevented a solution to date, and on what I consider the simple and obvious “win-win” solution that will transcend politics and benefit everyone, both in the United States and around the world.
Replacement Energy Technologies
The only sure way to alleviate the consequences of global warming is to stop adding carbon dioxide (and other greenhouse gases) to the atmosphere. Because most of our greenhouse emissions come from the burning of fossil fuels, this means we must find a way to replace these fuels with other energy sources. This brings us to good news: Technologies that would allow us to completely stop our use of fossil fuels already exist, and future technologies have even more promise. I’ll start by discussing the existing technologies that I believe can, in some combination, offer a solution: energy efficiency, renewable energy from sources such as wind and solar, and nuclear power.
The cheapest and easiest way to make headway against our current dependence on fossil fuels is to reduce the demand for energy, which can be done in two basic ways: (1) doing without some of the comforts we’ve become accustomed to, or (2) improving the efficiency of our energy-using devices. I have friends and neighbors who have done remarkably well at the first strategy through such techniques as walking or biking almost everywhere they go, hanging out clothes to dry instead of using a dryer, and turning their thermostats way down in winter. But while such dedication is admirable, it can be a tough sell to many other people. Indeed, while I like to think that I’m doing my part to help solve the problem, I still often drive even when I have other options, and I use a clothes dryer and keep our home at a comfortable temperature.
The realist in me therefore says that if we want to make big strides in reducing demand, we need to focus our attention on the efficiency side. This is much more possible than you might guess, because there is a great deal of waste in our current energy usage. For example, incandescent light bulbs convert less than 5% of the energy they consume into light, with the rest wasted (primarily as heat). Similar waste is found in almost every other device we use, as well as in our electrical power grid2 and in the fuel use of cars and airplanes. Therefore, if we can improve efficiency by reducing energy waste, we can maintain (or improve) our lifestyles even while significantly lowering our energy usage. To quote the definition given by physicist and environmental scientist Amory Lovins, energy efficiency means that we can “do the same or more with less.”
As an example, consider the energy used by buildings (both residential and commercial), which goes primarily into heating, cooling, lighting, and other electrical appliances. We can begin to reduce demand simply by installing better insulation and windows, which reduce the energy needed for heating and cooling, and by taking as much advantage as possible of natural light. We can go further by replacing old incandescent light bulbs with newer LED bulbs, which are about three to four times as efficient,3 and by similarly upgrading other appliances with more efficient ones.
Efficiency gains are also well within reach in other sectors of our economy, including transportation. For example, automakers already have cars on the market that get more than double the gas mileage of the average car driven in America, and doubling gas mileage means we need only half as much fuel to drive the same number of miles. Electric cars might do even better; electric motors are generally more efficient than gasoline engines, so if the power plant supplying the electricity is also efficient (or if the electricity comes from rooftop solar panels), then the total energy required per mile of driving can be reduced substantially. As an example in air transportation, consider Boeing’s new Dreamliner aircraft, which typically use some 20 less fuel per passenger mile than the aircraft they replace.
Overall, improved energy efficiency would seem to be a classic “no-brainer”: It allows us to obtain the same energy benefits that we do now while saving us money. Moreover, because it means less total energy use, it can help reduce the future amount of global warming even if we continue to use fossil fuels. Still, as we’ve discussed, I don’t believe that reducing the use of fossil fuels is enough; we need to stop their use entirely. Energy efficiency alone cannot do that, especially when we consider the growing demand for energy in developing nations. With that in mind, let’s turn our attention to energy sources that could take the place of fossil fuels.
The most fashionable alternatives to fossil fuels are renewable energy sources, such as wind, solar, geothermal, hydroelectric, and biofuels. While none of these are perfect — for example, toxic chemicals are used in solar panel production, wind turbines can kill birds, and dams for hydroelectric power can damage river ecosystems — they have the advantage of producing energy without the release of greenhouse gases. The chief debates about renewables therefore focus on how much energy they can realistically provide and whether they are cost-effective.
The easiest way to think about the energy potential of renewables is by considering current total world power consumption, which is about 15 terawatts.4 The wind carries more than 10 times this much power around the globe, and accessible wind sources are estimated to be enough to supply about 20 terawatts. In principle, then, wind alone could provide for all our current power needs. The potential of solar is far greater: The total amount of solar power reaching Earth is more than 20,000 times current world power usage. However, there is significant debate over whether current technology is up to the practical challenges of replacing all of our current energy with renewables. One hurdle lies in the fact that most renewables are intermittent — for example, solar works only when the Sun is shining, and wind only when the wind is blowing — and our current electricity grid isn’t well equipped to handle intermittent power. New battery (or other energy storage) technologies may solve this problem, as might changes to the grid, but no one really knows for certain.
With regard to cost-effectiveness, there’s great debate about renewables at present. However, as we’ll discuss shortly, my personal opinion is that this is a false debate, because the true costs of fossil fuels are actually far higher than we pay. I therefore believe that renewables are already cost-effective, so the only question is whether we can tap enough of their potential to completely end our current dependence on fossil fuels. The answer may well be yes, but until we know for sure, we should keep exploring other existing technologies. This brings us to the topic of nuclear power.
Before I give you my answer to the above question, let’s consider the major issues with nuclear power. I’ll start with the positive side. Nuclear power does not release any greenhouse gases, and it already supplies a significant fraction of the world’s energy. In some countries (most notably France) it is the dominant source of electricity. Based on this experience, there’s little doubt that nuclear power has great potential as a replacement for fossil fuels, particularly when combined with efficiency and renewables. There’s some question as to cost-effectiveness, but as I noted above for renewables, I believe that if we consider the full costs of energy, nuclear power will also prove to be cheaper than fossil fuels.
Of course, nuclear power also has some well-known drawbacks, including the danger of accidents such as those that have occurred at Three Mile Island, Chernobyl, and Fukushima; the problem of nuclear waste disposal; and the threat that terrorists might obtain radioactive nuclear fuel. The key question for nuclear power, then, is whether these drawbacks can be overcome. The answer is not yet fully known, but there is some cause for optimism.
Let’s start with safety. There’s no possible way to prevent all accidents, so even with the best safety precautions, we must consider the level of danger posed when some type of accident occurs. Today, the primary danger arises from the fact that existing nuclear power plants use what is called active cooling to prevent their nuclear fuel from overheating. This means that if an accident causes a problem in which the cooling system fails, it can lead to a dangerous meltdown and release of radioactive materials. However, new reactor designs have been developed to use passive cooling (for example, mixing the fuel with salt so that it expands if the temperature rises, thereby slowing the reactions), in which the power plant would automatically turn itself off if a similar accident occurred. These and other engineering improvements in principle offer the potential to make new nuclear power plants far safer than those built in the past.5
The issue with nuclear waste is that it can remain dangerously radioactive for tens of thousands of years, which means it can endanger future generations unless we find a way to keep it isolated enough that no one will ever come across it by accident. This has proved to be a significant challenge, but there are two key “buts.” First, some of the new reactor designs that address the safety issue can also significantly address the nuclear waste issue, because they can “reprocess” existing nuclear waste into less dangerous forms. Indeed, many nuclear proponents are confident that with proper design, the nuclear waste problem could be almost completely eliminated. Second, even without a perfect solution, nuclear waste will be dangerous only in the local regions where it is stored. While that is far from ideal, it still seems better than global warming, which threatens the entire planet.
Perhaps the most difficult of the three major issues is the threat from terrorism, since expanded use of nuclear power would mean more radioactive material being transported around the world. Still, technology may offer solutions. For example, the technologies that reprocess waste also leave the remaining materials much less radioactive and therefore unsuitable for building bombs (including “dirty bombs”). Beyond that, while it will be difficult to protect power plants and their fuel supply, we successfully protect other critical sites, suggesting that it should be possible.
Many thoughtful people have considered all these issues and still come down on opposite sides of the question of whether we should build more nuclear power plants. I myself have vacillated over the years. However, at present, I’ve come down on the side of “yes,” because I’m unconvinced that the combination of efficiency and renewables can end our dependence on fossil fuels soon enough to prevent severe consequences from global warming. In particular, because renewables require not just new power sources (e.g., wind and solar farms) but also changes to the grid and power management techniques, I believe it would take decades to make a full conversion to renewables even under the best of circumstances.
In contrast, I believe that if we were willing to invest sufficient effort and money, we could rapidly replace existing fossil fuel power plants with nuclear power plants that could feed power directly into the existing grid. How rapidly is a matter of great debate, but to me it just comes down to how important we consider it to be. For example, looking back at how rapidly our nation mobilized industry for World War II, it seems to me that it should be well within the realm of possibility to start an effort today that would lead to complete replacement of fossil fuel plants with a combination of nuclear and renewables within about a decade.
Everyone should consider the question of nuclear power carefully for themselves. But if it were up to me, I’d be going full bore into nuclear power, starting immediately, even while we continue to develop renewable energy sources and improve energy efficiency.
Based on the discussions above, I think it is clear that we already have the technology to end our fossil fuel dependence. Improved energy efficiency can take us a good deal of the way there, and some combination of renewables and nuclear can take us the rest of the way. I won’t claim that it would be easy, but it’s certainly doable.
One remaining question concerns whether it’s doable globally or only for the United States and other developed nations, since the kinds of solutions we’ve been discussing are currently quite expensive. Here, again, you’ll hear great debate, but as I’ll explain in more detail shortly, I’m a big believer in the power of market forces. I therefore believe that if the United States made the necessary investments for the transition away from fossil fuels, the markets would cause the prices of these solutions to fall so much that they would rapidly displace fossil fuels as the cheapest available energy technologies. In that case, the rest of the world would very likely adopt them. Better yet, at least from a U.S. point of view, the rest of the world would then be buying these technologies from U.S. companies, thereby strengthening our nation’s economy while benefiting the globe.
Proponents of so-called clean coal suggest that we might continue burning coal for fuel if we can find a way to “sequester” the carbon dioxide and other pollutants, generally by injecting them back into the ground (where they originally came from). Technologically, this may well prove possible, though the verdict on its practicality is not yet clear. However, I have a major concern with this approach due to traditional economics: It seems almost inevitable that sequestering emissions would cost more than allowing them to escape into the atmosphere, and that would give coal plant operators an incentive to cheat and thereby save money. In the developed world, we might be able to prevent such cheating through strict enforcement. But achieving that level of enforcement would likely be very difficult in less developed countries, including India and China. Personally, I therefore find it much better to consider solutions that get us away from fossil fuels altogether. That said, I support continued research into sequestration technology, as it may yet surprise me and prove to be viable.
The major argument in favor of natural gas is that it releases less carbon dioxide per unit of energy generated than oil and coal. In that sense, replacing oil and coal with natural gas is a good thing, particularly if combined with greater energy efficiency that reduces our total energy usage. But there are two main counterarguments. First, natural gas consists primarily of methane, which is a more potent greenhouse gas than carbon dioxide, and studies show that leaks of methane from fracking and other natural gas production can offset much or all of the advantage that would otherwise be associated with this fuel.6 In other words, unless we find a way to minimize these leaks, natural gas is not always better than oil and coal. Second, a true solution to global warming requires not just reducing but actually stopping the release of carbon dioxide into the atmosphere, and the burning of natural gas still releases carbon dioxide (just not as much per unit of energy as coal or oil). So while natural gas may slow the rate at which the problem becomes worse, it doesn’t offer a full solution.
I find these counterarguments compelling, and therefore prefer that we focus our efforts on technologies (such as nuclear and renewables) that could completely end the release of greenhouse gases. It’s also worth noting that utilities would have to operate new natural gas power plants for decades to recoup the large investments needed to build them, so the building of such power plants might actually prolong the time until we implement a real solution.
Future Energy Technologies
In addition to the existing technologies that likely could already solve the problem of global warming, researchers and entrepreneurs around the world are investigating many other technologies that could in principle do even more. Just to give you a sense of the tremendous potential, I’ll introduce you to three of my personal favorites among the many new ideas: fusion, solar energy from space, and microbe-based biofuels.
All current nuclear power plants are based on nuclear fission, in which atoms of heavy elements such as uranium, plutonium, or thorium are split apart. In contrast, the Sun and stars — and thermonuclear bombs (“H bombs”) — rely on nuclear fusion, in which hydrogen atoms are fused to make helium. Because the fuel source for fusion is hydrogen, we can get it from water (since water is H2O). Because its product is nontoxic (and very useful) helium, there’s no inherent problem of nuclear waste. Indeed, while details of the engineering would create at least some radioactive material, fusion is probably about the safest, cleanest, and most abundant energy source we know of.
To see how abundant, try the multiple choice question in figure 4.2. If you’re like most students I’ve worked with, you’ll probably take a guess from among choices A through D, since E sounds like an implausible throwaway. But E is the correct answer. Think about this fact. If we had the technological capability for fusion and you were willing to let us use your kitchen sink (and leave the faucet water flowing), then we could stop drilling for oil, stop digging for coal, dismantle all the dams on our rivers, take down all the wind turbines, and even turn off all the currently operating nuclear power plants. We’d be able to supply all the energy needed for the entire United States through the fusion of hydrogen extracted from the water flow of your kitchen faucet.7
Given such incredible potential, you might wonder what’s stopping us, and the answer is simple: Despite decades of effort, no one has yet figured out how to tap nuclear fusion for commercial power. But people are working on it, and the work might well go a lot faster if we devoted more resources to it. There’s no guarantee of success, but if it were up to me, I’d make sure we were putting a “Manhattan Project” level of effort into the development of fusion technology (though being careful that this was not at the expense of efforts to implement the current technologies we’ve already discussed). Because if we succeed, we’ll not only solve global warming, but will also have the ability to generate more energy than we can even imagine what to do with today.
As we’ve discussed, one of the major drawbacks to solar energy on Earth is the fact that it is intermittent, working only in the daytime when it is not cloudy. But it’s never cloudy in space, and if you put solar panels in a high enough orbit, it is never nighttime either. So another idea for solving our energy and global warming problems is to launch solar panels into high Earth orbit (figure 4.3), where they would absorb sunlight and beam the energy down to collecting stations on
It would obviously be expensive to launch solar panels into space, but perhaps not as expensive as you might guess. The “panels” for use in space might well be no thicker than a thin film of plastic wrap, so enormous panels could potentially be unfurled from lightweight spools that could be launched by existing rockets. Moreover, once launched into orbit, these panels would likely provide energy for decades (or more) without the need for replacement. Overall, the total launch costs for enough panels to meet all global energy needs for decades might well be less than we spend (globally) on energy in a single year at present.
The greater challenges to using solar energy from space probably lie in the technology for transmitting the energy to Earth, in building the collecting stations for that energy, and in tying those stations into a power grid that could distribute the energy around the world. But none of these challenges appear to be insurmountable, and proponents of solar energy from space argue that we could start implementing it now if we were willing to make a concerted effort on it. To learn more about this promising technology, a good starting point is this Web page from the U.S. Department of Energy: energy.gov/articles/space-based-solar-power. You’ll also turn up more information if you search on “space-based solar power.”
Biofuels are fuels made from plants or other living organisms. The best known biofuel has been ethanol from corn, which turns out to be very inefficient because corn agriculture is so energy intensive, and because it diverts land that can be used to grow food (which we also need!) to energy production. But microbial biofuels, such as those made from algae or from bioengineered organisms, offer far greater potential.
Microbe-based biofuels have the potential to stop global warming because even though they release carbon dioxide when burned, the microbes absorb it when they grow. This means that if you don’t use too much energy in making the biofuels, they can essentially be “carbon neutral,” meaning that the microbial growth absorbs exactly as much carbon dioxide as the fuels release when burned. In fact, some researchers are developing biofuels that might actually give us a net reduction in atmospheric carbon dioxide (by taking up carbon dioxide and converting some of it into minerals or other forms that would permanently remove it from the atmosphere), meaning they could potentially help reverse the damage that has already been done. It’s also worth noting that biofuels are much easier to use as fuels for airplanes and rockets than electricity generated by centralized power plants, so they may well prove to be of great importance even if we successfully implement other solutions such as fusion or solar energy from space.
Perhaps the best news about microbe-based biofuels is that they already exist. For example, algae-based biofuels have been successfully tested in commercial airplanes and in Navy ships. Their overall potential is still a matter of debate, but there’s no question that they could make an important contribution to our future energy supply.
Keep in mind that biofuels, solar energy from space, and fusion are just three of my personal favorite ideas for the future. People are working on many others, which brings us back to the key point: If we put our minds to it, we can develop technologies that won’t just solve our current problems, but will make the future better and brighter for the entire human race.
Imagine that, a couple of decades from now, global warming is rapidly worsening and no new technologies have been successfully implemented to stop it. What then? This scary possibility has led some people to ponder geoengineering schemes in which we would deliberately try to alter Earth’s climate in ways that might counter the planetwide effects of global warming. For example, some people have proposed seeding the atmosphere with aerosols that would reflect sunlight back to space, or even deploying giant sunshades in space. While I support continued research into these ideas, I have left them out of my discussion of solutions to global warming for a simple reason: With one exception that I’ll explain below, I don’t think we could ever be confident that any of these “cures” for global warming would be better than the disease.
The reason for my pessimism about most geoengineering schemes is that they would not by themselves reduce the amount of carbon dioxide we are releasing into the atmosphere. They therefore suffer from at least three major drawbacks. First, because they allow the carbon dioxide concentration to continue to increase, they do nothing at all about the problem of ocean acidification. As we’ve discussed, this problem is probably at least as serious as any of the other consequences of global warming, so a “solution” that leaves it unaddressed does not seem to be a real solution. Second, most geoengineering schemes require active maintenance; for example, the aerosol idea requires continually putting more aerosols in the atmosphere to replace those that rain out, and even the sunshades in space would likely need occasional orbital adjustments. If the maintenance ever failed — whether now or centuries from now — global warming would immediately resume, and if we’d continued adding carbon dioxide in the interim, it would be far worse than it is today. Third, these types of geoengineering introduce global climate factors that do not exist naturally and therefore are difficult to account for in models. As a result, we don’t have any good way to predict the full consequences of these schemes, so even if they successfully stopped the rise in Earth’s average temperature, we could not be confident that they wouldn’t create regional climate disruption.
All that said, there is one important exception, and that is geoengineering intended to actually remove carbon dioxide from the atmosphere. There are a number of technologies under development that might actually be able to do this (including the biofuels we’ve already discussed), essentially by absorbing carbon dioxide from the atmosphere and then incorporating it into rock or some other solid form that can be safely stored away. If any of these technologies could remove atmospheric carbon dioxide faster than we add it, then they might not only offer a real solution to the problem of global warming but also be able to reverse some of the damage that has already been done. For this reason, I believe it is critically important that we work on these technologies and implement them if they become available.8
Q - If future geoengineering technologies may be able to reverse global warming, can’t we just wait for those instead of dealing with the problem now?
Consider a medical analogy. Imagine that you have a potentially fatal disease for which scientists are working on a cure, but you also know that you can slow its progress if you quit smoking and improve your diet. Would you continue smoking and eating poorly in hopes that the cure comes before you die? I certainly hope not, and in the same way, it makes no sense to continue making the problem of global warming worse while we search for ways to reverse it. Moreover, the sooner we stop worsening the problem, the more likely that any future “cure” will be successful. So, as medical workers learn, first stop the bleeding.
The Obstacle to a Solution
I hope that I’ve convinced you that solutions to the problems of global warming already exist and will become even better in the future. So you might wonder, what’s stopping us?
The obvious answer is pricing. For individuals (or individual companies), it generally remains cheaper to buy energy created from fossil fuels than to implement any of these other energy solutions. This is especially true as I write in early 2016, when oil prices have plunged to their lowest levels in many years. But here’s the thing: It’s not cheaper for society, because there are a great many costs associated with fossil fuels that are very real but that are incurred by society as a whole rather than by the people who use the energy.
Economists refer to these costs as “externalities,” meaning costs that are not incorporated into the actual (“internal”) price we pay for energy. But I prefer to think of them in a different and admittedly more provocative way: I’d argue that our current energy economy is essentially a form of socialism. I see little difference between the way we socialize many of the true costs of energy and the way some countries socialize medical or other costs. To help you understand why, let’s go to our next question.
By a socialized cost of energy, I mean any cost that is real but that is borne by society as a whole rather than by individual energy users. There are many such costs, some of which are easier to quantify — and hence subject to less dispute — than others. In particular, there are three categories of socialized costs that almost everyone agrees on to at least some extent: (1) health costs associated with pollution from fossil fuels; (2) military costs of protecting the fossil fuel supply; and (3) the costs of direct subsidies and tax write-offs for fossil fuel companies.
Let’s start with the health costs. Besides emitting carbon dioxide when burned, fossil fuels release many other pollutants into the air and water, and these have real costs for human health that are borne by society as a whole through taxes, medical insurance premiums, and other shared health care costs. For example, in 2010 the U.S. National Academy of Sciences estimated the direct health costs of air pollution to be about $120 billion per year. Note that by direct costs, they mean only those that are quantifiable in terms of actual medical bills or loss of life. On top of this, there are indirect costs for lost workdays and reduced worker productivity when someone is ill, and the study did not include the costs of water pollution. I don’t think it is any stretch to assume the total health costs associated with pollution exceed $200 billion per year in the United States. And if you have paid attention to the extreme pollution that now occurs regularly in other parts of the world (figure 4.4), then you’ll realize that the global costs are probably far higher.
The military costs are a little more difficult to pin down, because while there’s no doubt that the United States spends a lot of money on military efforts that protect the international oil supply, these same efforts also serve other purposes. For example, the same Navy vessels that protect the shipping lanes used for Middle Eastern oil also serve in the fight against international terrorism. Nevertheless, studies by the U.S. Department of Defense and others have tried to quantify the cost of protecting the international oil supply; while precise conclusions vary, these reports seem to converge around an estimated cost of about $100 billion per year. Note that this is only the baseline cost (protecting shipping lanes, etc.) and does not include costs (both human and economic) of wars that have occurred in oil-rich regions or of interventions against enemies that rely on oil revenues to support their efforts against us.
The third category of generally agreed upon costs takes two forms: direct subsidies to fossil fuel companies for fossil fuel exploration and production, and tax write-offs for their own expenditures on these activities. Both of these have the same net effect of costing taxpayers real money, and in the United States they are estimated to add up to at least about $20 billion per year.
Notice that the above costs already total more than $300 billion per year for the United States alone. As an example of what this would mean if we asked users to pay these socialized costs, let’s suppose we decided to build them into the price of gasoline through a gasoline tax. Drivers in the United States use a total of around 150 billion gallons of gasoline per year, so charging users for the socialized $300 billion would require a new gasoline tax of about $2 per gallon.9 Most people find this amount to be surprisingly high, but as we’ve discussed, this would only stop the socialization of costs that almost everyone agrees are very real.
Many other socialized costs are clearly traceable to our use of fossil fuels, though they are more difficult to quantify. For example:
- Costs of environmental damage from such causes as oil spills, strip mines, and water contamination. These can be difficult to quantify because they depend on what value we assign to the damaged environment, but economists who have made the attempt suggest that they represent at least tens of billions — and possibly hundreds of billions — of dollars per year in the United States, and much more globally.
- Costs to the national economy of purchasing imported energy. These are also difficult to quantify but, for example, a U.S. Department of Energy study (“Costs of Oil Dependence: A 2000 Update,” by D. L. Greene and N. I. Tishchishyna) concluded that our dependence on imported oil had cost the United States about $7 trillion in lost wealth during the period 1970 to 2000, which translates to about $250 billion per year.
- Human costs of terrorism and totalitarianism that have been fueled by oil revenue. There’s no doubt that over recent decades, the enemies of democracy and freedom have been funded largely by revenue from oil, and they have used this revenue to spread terrorism, intolerance, and hatred around the world. It’s difficult to put a price on this destruction, but if we tried, I suspect it would greatly exceed the price of everything else we’ve discussed so far.
- Costs associated with global warming. While these may be relatively limited to date (though still many billions of dollars), the future consequences could easily cause these costs to rise above all the others combined.
The uncertainties in pinning down these costs haven’t stopped people from trying to estimate them, and even conservative economists have often come up with astonishingly high total values for all the socialized costs of fossil fuels. For example, in 2006, energy analyst Milton Copulos — who worked for both the Reagan administration and the conservative Heritage Foundation — concluded that the “hidden” costs of oil alone (that is, not even including costs associated with coal and natural gas) totaled $780 billion per year in the United States. A 2015 study by the International Monetary Fund (IMF) calculated the total global value of subsidies for fossil fuels at more than $5 trillion per year, of which more than $4 trillion represented costs before global warming was even taken into account.
The bottom line is that no matter how you look at it, the full costs of fossil fuels are not incorporated in their current market prices. Instead these costs are socialized, meaning they are borne by taxpayers and society as a whole. In fact, they are even socialized across generations, because some real costs, such as those associated with global warming, will be borne primarily by our children and grandchildren (and subsequent generations). That is why I say we have a socialist energy economy today.
Q - Are you saying that politicians who favor the status quo of energy pricing are secretly socialists?
I try not to engage in name calling, but I’m always surprised that so few people have paid attention to the clearly socialized costs that we have discussed, and by the associated irony that people who call themselves free-market conservatives have generally been the ones most resistant to any change in the energy status quo. I therefore suspect that these politicians simply have not studied the issue enough, and I hope that once they understand the facts of the matter, they will decide to apply their free-market principles to energy in the same way they apply them to other aspects of our economy. I also hope they will take to heart the definition of conservatism offered by Ronald Reagan in the quote that opens chapter 5 (page 95).
The Clear Pathway to the Future
There may be plenty of room for debate over the particular numbers that I’ve given you for the socialized costs of fossil fuels, but there’s no doubt that the true costs of these fuels are substantially higher than what individuals and companies currently pay for them. My numbers suggest that they are higher by the equivalent of at least a couple of dollars per gallon of gasoline, and it’s quite likely that the true costs are several times the current market prices. These ideas lead to what I believe to be the simple “win-win” solution to the problems we face with respect to energy, pollution, and global warming.
Imagine that instead of socializing the costs of fossil fuels, we charged these costs directly to the individuals and companies that use the fuels. We would then be able to make energy decisions through a fair comparison between the true prices of fossil fuels and other energy sources. I’m a big believer in the power of free markets, and I believe that if such a free market for energy existed, we’d find that the true prices of wind, solar, and nuclear are all already substantially lower than the true prices of fossil fuels. In that case, a free market for energy could rapidly lead to a solution to global warming, because everyone would have strong financial incentives to replace fossil fuel power with power from less expensive alternative sources. A free market would also encourage entrepreneurs and businesses to invest more in researching new technologies, because the potential payoff would be much more lucrative than it is with our current system, which keeps fossil fuel prices artificially low.
The seemingly obvious way to institute a true free market for energy is to build the currently socialized costs into the prices paid in the marketplace. Economists across the political spectrum agree that there’s one surefire way to do this: Institute a carbon tax that accounts for the socialized costs, so that market prices (with the carbon tax included) will reflect the true costs of fossil fuels. Indeed, this solution is so widely accepted among economists of all political stripes that you’ll rarely see any debate about its general validity. Instead, the debate focuses on two points relating to the implementation of a carbon tax: (1) how high it should be, and (2) what to do with the revenue it generates.
With regard to the first point, in principle the carbon tax should be high enough to account for all the socialized costs of fossil fuels. In practice, these costs are almost certainly so high that, at least in the short term, we could not institute the appropriate tax without great risk to the economy. But this is an easy problem to deal with: We simply introduce the carbon tax gradually, so that individuals and companies have time to adapt as it rises.
To the second point, the most common answer is that the revenue should be returned to those who bore the socialized costs, which means taxpayers and society at large. Broadly speaking, there are three possible ways of doing this: (1) We can lower other tax rates to offset the revenue coming in from the carbon tax; (2) We can provide “dividends” to all members of society from the revenue; and (3) We can fund government projects or services intended to benefit society. As you might guess, people of different political persuasions come to different conclusions about how those three possibilities should be weighted. For example, conservatives tend to lean toward lowering other tax rates, while liberals tend to favor dividends and/or increased government spending.
Personally, I’m much less concerned with what we do with the revenue than in making sure we institute a carbon tax so that the free market can take care of the critical problem of global warming. That said, if it were up to me, I’d institute what economists call a “revenue-neutral” carbon tax, meaning one in which all the incoming revenue would be returned to the public through some combination of lower tax rates or dividends.11 This is not because I’m necessarily opposed to more government spending, but because I think the question of appropriate spending levels should be kept separate from the question of how we solve the problem of global warming. Between lower tax rates and dividends, I favor a combination that is weighted toward dividends distributed more or less equally to everyone. The reason is that a carbon tax will necessarily have a greater impact on the poor than on the wealthy, and my personal sensibilities favor something that helps the poor offset this impact. Tax rate reductions offer little benefit to those already paying very little in taxes, but dividends represent cash in hand that can make one’s life a little easier.
To summarize, a carbon tax offers the simplest and best opportunity for creating a true free market in energy. Perhaps I’m overly optimistic about the power of free markets, but I believe that if we successfully created a free market for energy, we’d rapidly find solutions to the problem of global warming, all while strengthening our overall economy and improving our lives at the same time. For that reason, regardless of your political persuasion, I hope you will join in the growing movement for a carbon tax that will help end the current socialism of our energy economy.
“Cap and trade” is an alternative approach that, like a carbon tax, is intended to encourage market forces that would lead to more investments in alternative technologies that don’t emit greenhouse gases. You can read more about this approach by searching on “carbon trading,” but in brief it works like this: The government places a legal limit (“cap”) on the total carbon dioxide emissions that are to be allowed, then sells, auctions, or initially gives away permits that allow companies to emit portions of this total. Companies can then buy and sell (“trade”) these permits so that, for example, a company emitting more carbon dioxide than it is allowed can buy additional permits from a company emitting less than it is allowed. In principle, this encourages companies to reduce emissions since they can profit by selling their permits to other companies that have been less innovative. If the cap is lowered over time, the total emissions should go down.
Cap and trade systems have been used successfully for other pollutants; a notable example is a system in the United States that has led to dramatic reductions in the emissions that cause acid rain. For greenhouse gas emissions, cap and trade has already been implemented in the European Union and several other nations, and in the United States by California and the states involved in the Regional Greenhouse Gas Initiative, though there is debate about how successful these efforts have been to date. A bill to institute a cap and trade system was passed by the U.S. House of Representatives in 2009 but died in the Senate.
It’s certainly possible that cap and trade could successfully reduce greenhouse gas emissions, but my own opinion is that it is inferior to a straight carbon tax for at least two major reasons: (1) It is much more complex than a straight tax, since it requires the creation and maintenance of markets for the permits, and (2) unlike a carbon tax, which makes it easy for the public to see the true cost of the fuels they are purchasing, the behind-the-scenes trading of the cap and trade system will leave much of the public unsure why different energy sources cost what they do. Given these drawbacks, I see no reason for the added complexity of cap and trade when a much simpler carbon tax is likely to be just as effective, if not more so. That said, if it turns out politically to be easier to do cap and trade, it’s certainly far better than nothing.Q - What about other governmental approaches to dealing with global warming, such as subsidies for solar and wind, regulations supporting mileage standards for vehicles, and so on?
In the past, I have supported all of these things, because they represent small steps toward dealing with the problem of global warming. But if we were to institute a real carbon tax as discussed above, I believe other subsidies and regulations would become unnecessary, because the free market for energy would take care of the problem by itself. That is why I believe this solution transcends politics: Whether or not you favor government regulation in general, and whether or not you favor an unfettered free market in general, in this particular case the market economics are sufficiently clear to make the case for a carbon tax one that almost everyone can agree on.