Thursday, March 12, 2015

The Economics of Energy

The Economics of Energy
In today’s world, almost anything run by electricity is powered by fossil fuels, but at the rapidly increasing rate that we use our dwindling source, there will come a point in time when we will have to switch to an alternative fuel source. For the past couple of decades, countries around the globe have been harnessing other forms of energy and have been successful in designing a new way to create a “greener” and more sustainable form of energy, but the question remains, why haven’t we begun to implement these new forms of energy? The short answer is simple, the tradeoffs required are far greater than the consequences we could face when we finally run out of fossil fuels.
To have a good understanding of just how much the world depends on fossil fuel it’s important to note that United States is the leader in fossil fuel energy consumption per capita and that over 80% of the U.S.’s energy comes from fossil fuel. Fossil fuels are a non-renewable resource that takes thousands upon thousands of years to even start replenishing which makes our dependency on it alarming because it is projected by the year 2070 we will have completely drained our current sources (Kathryn). Yet even with this countdown already hanging over our heads, we continue to burn our reservoirs without creating a back-up plan for when we need to switch our energy sources.
Some of the top “green” sources of energy are solar, hydro, wind and natural gas but our usage of all of these alternative methods pale in comparison to our fossil fuel use. In end it all boils down to the cost it would take to completely revamp the economy surrounding energy to switch from fossil fuel dependence to any other method. Similar to a coal burning power plant, any renewable source of energy has a steep upfront cost to build, but unlike fossil fuel, there aren’t countless measures and extra costs that are included to remove the waste such as carbon dioxide and other air pollutants. These alternative energy sources, although, do have “their only ongoing costs [of] maintenance and operation” (Heal) that begin to drive the cost up.
Looking between the drawbacks and benefits to both relying almost completely on fossil fuels and transitioning to more environmentally friendly methods, it begins to ask which opportunity cost is more reasonable than the other. On one hand we have the knowledge that one day the cost of drilling for fossil fuels will outweigh the demand but on the other we know that to change our dependant world, it will be a very expensive transition. Because most countries are run at least as a partial mixed economy, the government has a say in the matter, so subsidies can be put in place as incentives to either change or remain the same. Some countries like Germany and Denmark are in transition to remove themselves from fossil fuel dependency yet they face “the highest energy prices in the rich world” (Economist). So it’s obvious that both roads will lead to a great amount of expenses, whether it’s to abide to the environmental rules and regulations and continue with fossil fuels or completely change the world’s energy infrastructure for the sake of sustainability.

Sources:
  • Heal, Geoffrey. "The Economics of Renewable Energy." NATIONAL BUREAU OF ECONOMIC RESEARCH, 1 Jan. 2009. Web. 10 Mar. 2015. <http://www.nber.org/papers/w15081.pdf>.
  • "When Will Fossil Fuels Run Out?" When Will Fossil Fuels Run Out? Carbon Counter. Web. 10 Mar. 2015. <http://www.carboncounted.co.uk/when-will-fossil-fuels-run-out.html>.
"Why Is Renewable Energy so Expensive?" The Economist. The Economist Newspaper, 5 Jan. 2014. Web. 10 Mar. 2015. <http://www.economist.com/blogs/economist-explains/2014/01/economist-explains-0>.

6 comments:

  1. I do think that we should deviate from using so much fossil fuels because if we continue to use up our fossil fuels and don't even try to start a back up plan when they are gone we will have almost not way to power things if we don't slowly implementing them into our daily usage. Even though using these other sources being the opportunity cost we need to start to make the trade off and begin to use them.

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  2. Overall this article is very interesting. I had no idea how much fossil fuel the United States used or how much more fossil fuel the United States uses compared to the other countries. Since fossil fuel will most likely be gone by 2070 America really needs to find other sources of energy to use. Although it is expensive to use new forms of energy now it will be cheaper in the long-run because eventually the cost to drill for fossil fuel will outweigh the demands and the substitutes will be cheaper.

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  3. It is stunning how soon our typical usage of power in fossil fuels is going to end. This argument can easily also back up other arguments for things in addition to clean energy. I feel that the information stated can also back up a reason for space exploration and colonization. But also, to save our civilization on earth we need to make an effective way of creating renewable energy, in a way that is cheap. The person that discovers a way to create cheap clean and renewable energy will be the richest, most praised person in the modern world. A solution that can solve all our problems may be unreasonable, but it is also necessary.

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  4. In the short-run, it seems disadvantageous to switch to alternative sources of energy, yet in the long-run these advantages begin to surface. Certainly governments of nations seeking to improve the future store of energy sources would provide subsidies to companies that desire to create energy from new sources, which would help to minimize hesitancies of these companies. We can’t always avoid alternative fuel sources because of our fear of the short-run deficits, or else we will never succeed in properly improving as a collective society.

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  5. I don't understand why the government is always complaining so much about how much it would cost to switch from fossil fuels to alternative energy sources. I mean, isn't it a better idea to pay a monetary cost now and help our planet stay afloat than to wait until we've polluted the world irreversibly and are out of cheap ways to extract any more fossil fuels at all? What are we going to do then? There are already many countries taking initiative to run on more beneficial energy sources (as I pointed out in my upcoming blog, Iceland runs on almost entirely geothermal energy), but the US and other leading industrial countries are the ones who really need to step it up if we want a world change. There should definitely be rewards for countries that use renewable energy, yes, but it'd be an even bigger reward to save the planet and conserve precious resources, I think!

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