The True Cost of Fossil Fuels

February.23.2012

The Truth About Fossil FuelsFossil fuel companies have got it good. Our reliance on the energy that these industries produce has led to an “ unholy alliance with government based not just on the money that they contribute to political campaigns and spend on lobbying but on their ability to hypnotize us with false prices,” according to Dylan Rattigan’s new expose aptly titled Greedy Bastards. For decades, the fossil fuel industry has enjoyed subsidies, tax breaks, military assistance in volatile areas and help cleaning up environmental disasters while bragging about keeping the cost of fuel down.

The true cost of fossil fuels is not just environmental, but fiscal too. The industry receives an annual bailout of $10 – $40 billion and, according to an Environmental Law Institute study, oil companies alone received $72 billion in handouts between 2002 and 2008. When disasters occur, the fossil fuel industry relies on government to help clean up the mess, utilizing tax payer’s money to do so.

The coal industry is also heavily subsidized. A 2009 report from the National Research Council investigated the massive toll that air pollution, resulting from the burning of fossil fuels, takes on public health. They estimated that over $120 billion is spent annually on diseases resulting from air pollution. A Harvard study on the health costs of coal was even more dire; “Between the land disturbance, the mountaintop removal, the processing … and the combustion, we estimate that this is costing the American public somewhere between a third to half a trillion dollars in health costs and deaths,” said Dr. Paul Epstein, lead researcher of the Harvard study. The study found the true cost of coal was about 26.86 cents more per kWh than we currently pay. The American Economics Review crunched the numbers and discovered that the electricity generated by coal actually cost more than it was worth.

The Truth About Fossil FuelsIf the true costs of fossil fuel energy were represented in the price, the move to renewables would be expedited. The problem is that no one wants to pay the true price of fossil fuels and they are reticent to make the investment that switching to renewables would entail. The solution? Fee and dividend schemes have been suggested by several leading thinkers in the industry. Under this model, the fossil fuel companies would be charged a small annual fee which would then be distributed to the public. NASA’s Dr. James Hansen is a proponent of the scheme: “The price of fossil fuel energy will rise, but with today’s fossil fuel uses, over 60 percent of the people will get more in their dividend than they pay in increased energy prices. People who have several houses or fly around the world all the time will have costs that increase more than their dividend. People will tend to make consumer and lifestyle choices that minimize their carbon emissions—this will happen naturally via the prices that they see.”

The Obama administration calls for the end to fossil fuel subsidies every year; a call that garners much bi-partisan support. However, election campaign handouts serve to secure the fossil fuel industry subsidies. Some European countries have thrown off the shackles of fossil fuel subsidies. Although gas costs two to three times what we pay for it, the rush to build more fuel efficient homes and vehicles means that soon they will have weaned themselves from their reliance on fossil fuel and will, ultimately, be paying less for their energy. Less money spent on energy, and also on healthcare and military support for the fossil fuel industries overseas will increase their savings exponentially.

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The True Cost of Fossil Fuels