In the previous module, we looked at the basic economic analysis showing that the world’s people will be better off if the solid scholarship on energy and environment is used efficiently. And, we mentioned that if we are close to being influenced by limits to growth, then the motivation to use the scholarship is stronger. Earlier in this module, we looked at some of the ways that policies can be used to address these issues. Next, we will briefly consider a number of issues that influence policy choices, including national security and price stability.
Any energy source that supplies a significant fraction of human use is almost guaranteed to have “externalities”—unintended consequences for people and other living things. Solar farms in the desertmay shade the habitat of cacti and tortoises, wind turbines kill some birds and interrupt views, nuclear plants require long-term storage of potentially poisonous waste, fracking produces “flow-back” fluids containing possibly harmful chemicals that must be disposed of, and so on. Realistically, we have no practical hope of an energy system that doesn’t involve unintended costs and “Not in My Back Yard” (NIMBY) issues.
But, several studies have found that wind turbines are not nearly as deadly to birds as cables on radio towers, skyscrapers, cats, or the climate changes from fossil fuels that will be avoided by use of wind turbines (see Enrichment on the next page).
Want to learn more?
Read the Enrichment titled Living with Wind Turbines and Coal Exhaust.
In general, the externalities of renewable energy are quite low—covering thedesert with solar cells does not use the most productive landscape, and covering roofs with solar cells replaces one human-made surface with another that has essentially the same effect on neighbors, except it generates electricity.
In contrast, recent scholarship shows that coal-fired electricity as currently practiced in the US and some other places (parts of China, for example) has very high negative externalities, from issues such as particles and mercury causing health problems. Some studies for the US (see Enrichment) have indicated that for each dollar spent by consumers on coal-fired electricity, society spends a similar amount, or more, in lost health and environmental quality. Hence, these studies indicate that there would be economic gains from additional regulations or other policy actions to clean up or reduce coal burning, even if the effects on climate change are ignored.
To see how people in Denmark and Texas came to welcome the wind into their backyard, you can watch this clip. Beauty really may be in the eye of the beholder, and things that pay the beholder good money may look just a little more beautiful.
Credit: Earth: The Operators' Manual [1]. "Yes, In My BackYard" (aka YIMBY!). [2]" YouTube. April 22, 2012.
Businesses routinely pay more for long-term, guaranteed supplies than the lowest short-term price available on the spot market. Unexpected, large price increases ("shocks") have real costs. There is, for example, a rather close relation between oil-price shocks and major economic recessions. One fairly recent study, from members of the Research Department of the US Federal Reserve Bank of Philadelphia, concluded that even with optimal policies, central banks cannot completely offset the “recessionary consequences of oil shocks” (Leduc, S. and K. Sill, 2004, A quantitative analysis of oil-price shocks, systematic monetary policy, and economic downturns, Journal of Monetary Economics 51, 781-808). Reducing reliance on oil may help offset such shocks, however, and the analogy to common business practices suggests that at least some extra cost is justified to smooth such fluctuations.
Until recently, countries with local resources of coal or gas might have relied on them; the greater difficulty of transporting coal and gas long distances for international trade has insulated them from some of the spikes in oil prices arising from the effects of Mideast political unrest or other issues. However, huge investments are being made to increase the shipping of coal and gas. This may reduce (but not eliminate) variability in oil prices, by broadening the total supply of easily traded fossil fuels, but likely by increasing variability in coal and gas prices.
Renewables and nuclear power typically have high construction costs but low operating costs compared to fossil fuels; once built, the price of power from renewables and nuclear tends to be more predictable than from oil. Ironically, the fluctuations of renewable energy sources over times from seconds to seasons (wind dies, sun sets) are highly challenging for engineers, complicating construction of an energy system based on these sources; however, at longer times the fluctuations of fossil fuels are larger, with renewables offering stability and predictability for the financial side of the industry. The US Pentagon has stated that it is increasing its use of renewables and its conservation efforts in part to provide protection from energy price fluctuations (U.S. Department of Defense, 2010, Quadrennial Defense Review Report [3], p. 87,).
Militaries around the world face the difficulty of defending their countries, and contributing to peacekeeping or humanitarian efforts. Changing conditions make this mission more challenging.
The US military, in its Quadrennial Defense Review (2010), made the often-quoted statement “. . . climate change, energy security, and economic stability are inextricably linked. Climate change will contribute to food and water scarcity, will increase the spread of disease, and may spur or exacerbate mass migration.”
The importance of climate change for security was echoed by US Navy Admiral Samuel J. Locklear III, whose duties include relations with North Korea and many other Pacific nations. When asked about the biggest threat to stability in the region, he stated that climate change “…is probably the most likely thing that is going to happen… that will cripple the security environment” over the long-term (Bryan Bender, Boston Globe, March 9, 2013).
Slowing down climate change thus may improve issues that the military considers important for national security, in the US and many other countries. If national security merits investments above those for an economically optimal path, this would tend to motivate more action now to address the coupled problems of energy and environment.
Earth: The Operators' Manual
For a little more about what the US military thinks about climate change, and what why are doing, take a look at these two short clips.
Credit: Earth: The Operators' Manual [1]. "The Pentagon & Climate Change [4]." YouTube. April 16, 2012.
Credit: Earth: The Operators' Manual [1]. "Toward a Sustainable Future: "Khaki Goes Green [5]."" YouTube. April 9, 2012.
Employment is an important and often contentious issue in most countries, with concerns about providing enough good jobs for everyone who wants one. Fossil-fuel companies unequivocally provide many jobs, and good ones. Recently, natural-gas fracking in Pennsylvania, where Dr. Alley lives, has generated many jobs (although some of them have come at the expense of coal jobs). How many? Do you count only the jobs in the industry? Or the jobs in supply industries? Or the jobs that are supported by the salaries of people in the industry and the supply industries through the money they spend? Different groups promote different numbers, which can vary greatly. Real issues underlie some of the choices—you could argue that if Pennsylvania did not produce gas, it would produce coal, or wind energy, or something, so the jobs would exist. Or, you could argue that if Pennsylvania did not produce gas, the jobs would all go to Texas or Saudi Arabia, and then you need to decide whether Pennsylvania should count jobs there or not.
With a sufficiently broad view, the most accurate assessment probably is that, if we ignore the economic good from avoided climate change, switching from fossil fuels to alternatives will have relatively little influence on employment overall, if the switch is done so as to minimize impacts or maximize gains in the economy, as described above. A small but notable body of literature points to gains in employment with a switch. And, if the advantages of an economically optimal course as opposed to a business-as-usual course are considered, gains in employment become likely. A few relevant references are given in the Enrichment. Note that although the literature on employment effects of energy choices is growing rapidly, it has not reached the level of reliability that applies to, say, the radiative effects of CO2.
The preceding sections are not a complete list of policy-relevant issues. And, as noted earlier, politics, psychology, and other issues are important. Policy choices that shift employment from one profession to another have costs for people who located, trained, and otherwise prepared for the lost jobs. And, those losing jobs have faces and names, whereas the people who will get the new jobs generally don’t know who they are, and often are still in school somewhere, so policy choices that have no effect on total employment nonetheless have real economic costs and often much larger political costs.
Nonetheless, the available scholarship shows clearly that an efficient response to climate change is economically beneficial if the costs of climate change are included. Even ignoring the benefits of avoiding climate change, the response can be made at a cost that is small compared to the whole economy (say, 1% or less, rather than 10% or more), with the possibility of the most efficient response having no effect or even yielding economic and employment benefits, while the response clearly can have benefits for national security and avoidance of negative externalities of the energy system.