Congratulations to Archibald England this weeks Climate Community Citizen of the Week!
Archibald is a student at The University of Chicago and participated in our recent Chicago Challenge. In the Challenge students were asked to comment on the proposition: Agree or Disagree: The United States should end ALL fossil fuel subsidies. The entire question can be found at Citizen of the Week Special Contest and was posted by another one of our winners Kyle Gracey who is a teaching assistant to Professor Sabina Shaikh (one of our founders and authors).
The following is the answer that Archibald submitted:
Agree: Fossil fuels create negative externalities in production and consumption, with this cost coming in a range of forms, from greenhouse gases that exacerbate the problem of climate change to air pollution in urban areas that have health implications. Between 2002 and 2008, $72.5 billion was spent on fossil fuel subsidies, over double the $29 billion spent on renewable energy subsidies. Ending subsidies would allow the total cost of energy to the individual, and society as a whole, equate (or at least more closely reflect) to the actual price. It is established economic fact that by subsidizing fossil fuels more heavily, they become relatively cheaper as a source of energy than renewables. By banning all fossil fuel subsidies, the relative cost of renewable energy will decrease, increasing its consumption while not having the negative externalities associated with fossil fuels.
Yet, the environment is not the only concern that should be considered in this discussion. If we are to assume that the overall goal is to maximize the benefit to American (or world) society, then we must weigh fossil fuels' negative externalities against the benefits of cheaper electricity and the aid that provides to the economy as a whole, particularly manufacturing, as well as the benefits to the individual realized by lower energy bills. Fossil fuels are integral to the U.S. economy, forming 71% of the electricity production and 97% of the transport sector's consumption, and so the removal of subsidies would have a powerful impact on the U.S. economy. Yet, if the payments that account for fossil fuel subsidies were instead transferred to subsidizing renewable sources, then the economic consequences can be somewhat ameliorated, although there would most likely be an increase in costs in the transport sector (although arguably this would be a good thing as true cost would reflect price, and thus people would travel less and produce less emissions, for example).
Since the essence of this debate revolves around what makes most economic sense in the long term, we must consider the economic cost of inaction, with fossil fuel subsidies maintained. The U.S., as the second largest emitter of greenhouse gases behind China, while also providing international leadership should factor the long-term economic cost of emissions from within the U.S., and from the world as a whole. By eliminating fossil fuel subsidies, the U.S. would both reduce national greenhouse gas emissions as consumption decreases, while also making political discussions on emission reduction agreements more likely. The potential economic cost in GDP terms, by 2100, is expected to be 3.6% if no action is taken against climate change (National Resources Defense Council). Thus in the context of long term horizons, the economic costs incurred by removing fossil fuel subsidies will likely be dwarfed by the long term costs of failure to act against climate change. Therefore, although the U.S. is currently navigating turbulent economic waters, and the removal of fossil fuel subsidies will apply economic costs across the U.S. economy as energy prices, transportation prices, etc increase, the short-term economic cost borne is a price worth paying to help steer the U.S. economy away from a more dramatic decline caused by the impact of climate change in the long-term.
To conclude, the impact of climate change in the long-term is huge 3.6% of GDP. Removing fossil fuel subsidies is a key step to reduce the impact of climate change, while also producing benefits in the form of lower health costs, greater energy independence, reduction of acid rain, etc. as consumption of energy from fossil fuels decrease. If we, as Americans, want to seek the least-cost solution to ensuring long-term economic growth in this nation, a repeal of fossil fuel subsidies is an important, and necessary step; who knows, it may even spur more international action in reducing greenhouse gas emissions.
We would like the thank all those who participated!