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It's Official: Fossil Fuels Don't Cost Less

I recently slogged through 373 pages of a National Academy of Sciences' report released last October. Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use is the most thorough cost accounting of energy sources I have ever seen. It shows how coal and other fossil fuels create enormous costs that the rest of us pay for. Whether we know it or not. Whether we like it or not.

According to the report, the damages from coal cost us 3 to 13 cents per kilowatt hour of electricity. That is about $62 billion a year and 25 to 100 percent of what we pay for electricity from coal. (The report did not even count any damages from climate change, water pollution from mining or dozens of other costly problems.)

If that sounds like a subsidy, it should. Because that is exactly what it is.

But still we hear that fossil fuels are cheaper:

  • Republican functionary Christopher Horner's new book, Power Grab, proclaims that renewable energy will "bankrupt" this country and is a "declaration of war against America's most reliable sources of energy ─ coal, oil, and natural gas."
  • Wall Street Journal editorial writer Stephen Moore agreed on the back of the book's cover, calling it a plot between Big Government and Big Labor.

Before I became a card-carrying member of this conspiracy, I studied for my MBA at the University of Chicago where I met and spoke with the great man himself: Milton Friedman.

He was an economist who always asked "What does it cost?" Not the price ─ that often hides the cost. You do not need a Nobel Prize to see the freshman mistake of those who say wind and solar are too expensive to compete with coal: They confuse price with cost.

The hidden costs of oil are even larger.

Energy analyst Blaine Townsend says "the web of direct subsidies includes billions in government sponsored low-cost construction loans and tax breaks like the Foreign Tax Credit. Last in, first out" accounting practices, special write-downs for core operations and royalty "relief" for leases in the Gulf of Mexico have robbed the federal coffers of billions more" ("U.S. Should Subsidize Green Energy, Not Big Oil," Dec. 24, 2009, San Jose Mercury News).

We have not even started counting the costs of what could be the biggest and most expensive oil spill in history.

And if you want to put a price on what it takes to send our bravest and best heroes into harm's way to protect our supply lines in faraway places, go ahead. Just make sure it starts with a "T."

Turns out, when you add up all the costs of all the different kinds of energy, solar and wind are often less expensive than fossil fuels. And the price of solar is going down, while the costs of coal and oil are going up.

The National Academy of Sciences says it is happening now and is real today.

Utilities get it ─ that is why more and more are doing everything they can to move away from coal in favor of cleaner and less costly alternatives.

For that, we owe a debt to the National Academy of Sciences and economists like Milton Friedman.

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