I did some back of the envelope estimates of the cost of the fossil fuels we use in a year.
The source of these figures is the USA DOE Energy Information Agency https://www.eia.gov/tools/faqs/faq.php
But any mistakes in arithmetic are my own.
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7.5 billion barrels of petroleum products consumed in USA in 2018
average price $69.78 per barrel
Cost of petroleum products: $523,350,000,000
In 2017, the United States consumed about 27.11 trillion cubic feet (Tcf) of natural gas
average of $4.08 per thousand cubic feet
Cost of natural gas: $110,608,800,000
EIA expects total U.S. coal consumption in 2018 to fall to 691 million short tons (MMst)
$39.09 per short ton (2017 price)
Cost of coal: $27,011,190,000
Total: $660,969,990,000
We spend nearly $661 billion per year or something like that on fuel alone every year.
And these are only ballpark numbers, probably on the low side.
With the 2018 USA GDP at $20.50 trillion, the cost of fuel is approximately 3.22% of annual GDP
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Another “cost” of fuel is covered in the International Monetary Fund’s recent report on fossil fuel subsidies, covering 191 countries:
https://www.imf.org/en/Publications/WP/Issues/2019/05/02/Global-Fossil-Fuel-Subsidies-Remain-Large-An-Update-Based-on-Country-Level-Estimates-46509
They look at the difference between the market price and “how much consumers would pay if prices fully reflected supply costs plus the taxes needed to reflect environmental costs and revenue requirements.”
Global fuel subsidies were $4.7 trillion (6.3% of global GDP) in 2015 and were projected to be $5.2 trillion (6.5% of GDP) in 2017
China subsidizes the most with $1.4 trillion per year
$649 billion in 2015 for the USA, 3.6% of GDP
Russia at $551 billion
EU at $289 billion
India at $209 billion
“Efficient fossil fuel pricing in 2015 would have lowered global carbon emissions by 28% and fossil fuel air pollution deaths by 46%, and increased government revenue by 3.8 % of GDP.”
Subsidies consist of underpricing for local air pollution, the largest source (48% in 2015),
global warming at 24%
broader environmental costs of road fuels at 15%
undercharging for general consumption taxes 7%
supply costs 7%
Coal and petroleum get 85% of the global subsidies monies.
Coal receives 44% of subsidy monies
petroleum 41%
natural gas 10%
electricity 4%
“If fuel prices had been set at fully efficient levels in 2015, estimated global CO2 emissions would have been 28% lower, fossil fuel air pollution deaths 46% lower, tax revenues higher by 3.8% of global GDP, and net economic benefits (environmental benefits less economic costs) would have amounted to 1.7% of global GDP.”
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The USA spends about $661 billion per year on the cost of fuel
and another $649 billion on subsidies for that fuel
That’s about $1.2 trillion per year for the full cost accounting of fossil fuels and such fossil foolishness.
That’s about 7% of USA GDP
The energy transition, Energiewende, of Germany is estimated to cost 0.5 – 1.2% of GDP per year
Source: https://www.cleanenergywire.org/factsheets/how-much-does-germanys-energy-transition-cost
How do you pay for the Green New Deal? You do away with the cost of fuel (and all the subsidies that go along with it).
Is there a way that pushes the costs of transition onto the energy producers instead of the consumers? Lifting the subsidies overnight will result in short and mid term price hikes that will make this proposal politically untenable.
The way to sell the Green New Deal, which I strongly support, is to clearly frame it as a jobs program. Putting people to work to maintain America’s dominance of green energy production. That’s the populist way to frame it. Starting with price hikes is a non starter, although using some of the revenues generated by ending the subsidies to rebate consumers would be a wise political investment.
What if we not so much end the subsidies as transfer them to greener energy sources? That way as prices increase on certain fuels they will plummet for the fuels we want people to use.
I’m neither an economist nor do I play one on TV but there should be ways to reduce the subsidies on fossil foolishness and transfer them to renewables if there is the political will to do so (there isn’t – yet).
What makes me laugh is that in all the conversations about carbon pricing there is very, very, very little discussion of the fossil foolish subsidies.
Incidentally, I did another back of the envelope estimate of the USA government research into energy sources from about 1950 to 1980 using the available data. If memory serves, and don’t hold me to it, fossil foolishness and nuclear received about $50 or $60 billion over that time period while renewables and efficiency received $5 to $6 billion. The ratio is correct but the numbers may be wrong.
PS: The Paley Commission Report in 1952 called for a transition to renewables. It was a wide-ranging energy and strategic materials study Truman commissioned and every President since has ignored.
I’m all in for Green energy, but the idea that you can use dirty energy to subsidize or underwrite clean energy is problematic. Remember when the tobacco companies were required to spend money on anti-smoking campaigns? The result was that the cost of cigarettes went up, the message was a short-time boon to people providing anti-smoking materials (myself included), and then the project dried up. It gave the companies more profits, since the new prices far outlast the punishment phase. Kids now smoke and vape, and we have made dope legal to reduce administrative costs of crime and to satisfy the perpetual mantra of ‘more revenue,’ by introducing yet another flat tax into our allegedly liberal state. The proposed solution repeats both mistakes of 1) taxing what you wish to eliminate and 2) flat taxes.
We have already seen what happens when the cost of oil goes down. The oil wells go dormant because there is no money to be made. So if you want to end fossil fuel, then you should both stop taxing it and stop subsidizing it. Yes, subsidizing green power is a good idea, but separate the source of the funds from fossil fuels and flat taxes.
If we move towards a renewably powered economy, the cost of fuel will go away. In fact, every solar panel and wind turbine reduces the market share of fossil foolishness. My exercise in economic estimation was an attempt to look at the scale of the market as I haven’t seen any other attempts. What is most interesting to me is the comparison between the costs of the German Energeiwende as a percentage of GDP and the percentages of the USA economy devoted to paying for fossil fuels and subsidizing fossil fuels. We can pay for a renewable transition IF we look at the worst of the fossil foolishness and replace it with renewables. For instance, new wind and solar generation is now being contracted by utilities, some in the USA, at 2¢/kWh while existing coal generation costs between 4¢ -40¢/kWh. There should be some way to leverage those economic facts to speed the transition and reduce fuel costs while expanding renewable generation.