William F. Goetz, MD started the topic Evidence-based analysis of sustainability initiatives – Part 3: Subsidies and externalities. in the forum Budget / Performance 5 years, 8 months ago
Energy production from fossil fuels is estimated to cause 30,000 excess deaths per year in the US from pollution. More US citizen die every year from this pollution than the cumulative deaths from all the years of our recent wars. It causes an estimated 400,000 deaths worldwide.
On top of this, its global warming costs are estimated to be in the range of trillions of dollars.
Such hidden costs, also known as externalities, disrupt the economic, political, geologic, biologic, geographic, and social equilibrium of governments and citizens, thus upsetting global, transnational, national, homeland, and individual security (Homeland Security Affairs Journal, https://www.hsaj.org/?article=9.1.6).
The National Academy of Sciences estimates the hidden health costs of pollution from fossil fuels in the US to be in excess of $130B per year. The environmental costs add billions more (“The Hidden Costs of Energy.” http://www.nap.edu/openbook.php?record_id=12794&page=1).
Despite this, the US subsidizes fossil fuel energy producers to the tune of more than $500 Billion per year $500,000,000,000 – note the number of zeroes). Globally, the subsidies account for $2.4 Trillion annually ($2,400,000,000,000), or about 3% of the world’s GDP, and 8% of global government revenues (International Monetary Fund, https://www.imf.org/external/np/pp/eng/2013/012813.pdf).
The fossil fuel subsidies noted above are vigorously supported by the same free market advocates who vehemently decry renewable energy subsidies as an anathema to “free market” principles. Yet, in total, these current fossil fuel subsidies make any proposed renewable energy subsidies look like pocket change.
Because these subsidies and externalities (the aforementioned hidden health and environmental costs) are not reflected in the price of gasoline at the pump, this is a textbook example of the failure of free markets to set prices.
Allowing the market to set the cost of gasoline would invariably raise the cost per gallon substantially. The IMF and others have suggested ways to limit the impact of such rising gas prices. The bottom line is that this would put pressure on governments and companies to find less costly alternatives, such as renewable energy sources and mass transit. Done in a reasoned manner (see IMF article for strategies), overall transportation costs would equilibrate at lower absolute levels, and cause less harm to humans and the environment.
We might also consider taking away fossil fuel “entitlement” subsidies. It would assuredly decrease jobs in the fossil fuel sectors. However, since every dollar into the renewable energy sector creates more jobs than money added to the fossil fuel sectors, more jobs would be created, with a net increase in GDP.
If we transferred only a portion of the eliminated “entitlements” from fossil fuel producers to the DOD, we could refund our military. If we transferred another portion to the DOH and states, we could recoup any unanticipated costs of Obamacare “entitlements,” which are so decried by free market advocates.
Fossil fuel “entitlements,” along with the consequent negative effects of global warming, represent the most costly failure of the free market in human history.
The elimination of these fossil fuel “entitlements” would save countless lives, now and in the future.
How many lives does your gallon of gasoline cost?
William F. Goetz, MD
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