These costs are not paid by the fossil fuel industry.

Sure, if the fossil fuel industry had to cover the liability of their products negative consequences, the price of fossil fuel would be higher. Instead, the costs are hidden, even excused by regulatory agencies so that the industry does not have to account for social, environmental, or systemic costs otherwise offloaded onto the public.

Do you know how expensive climate change is today? Do you know how much more expensive climate change will get in a decade, a half-century, a century? Best start that special savings account!

Many Industries Account for the Externalized Costs

Despite the fossil fuel industry having started a century and a half ago, Big Oil is still getting a lot of sweetheart deals. What’s interesting is how few other industries manage to get their own sweetheart deals. The chart below breaks out several major industries where the external costs are part of the cost of business.

The awful part of the story is that other industries have their lobbyists and champions (vassals?) in Congress and the White House, and that with the rise of dark money schemes (well before Citizens United, by the way—read Jane Mayer’s Dark Money, from 2016 if you’re sleeping at night), the trend has been to loosen regulations for many industries. The net effect is to increase these industries’ profits, but the costs associated with the industries don’t go away. These costs simply get passed on, typically indirectly and therefore under the radar, but the costs are still there. The fossil fuel industry remains the reigning queen of significant cost passed on—Shhh!—to everyone else.

Still, the trend in Washington these days would have more and more industries join that club. Reducing regulations is one main tool. Cancelling laws, another; think about the consequence of dropping the Glass-Steagall Act in relation to the 2008 crash.

We’re Paying for Carbon… Unless You’re a Shareholder

How much will fossil fuel pollution and the consequences of climate change cost the world in 2025, 2050, and 2100? You’ll find all sorts and ranges of numbers answering this question, but the thing these numbers have in common is that they’re huge. Here’s an AI Overview for this question:

The global economic cost of climate change and fossil fuel pollution is projected to reach tens of trillions of dollars annually, rapidly compounding over the coming decades. According to major macroeconomic climate studies (such as those by the Potsdam Institute for Climate Impact Research and the Network for Greening the Financial System), the estimated damages are broken down as follows:

• • 2025: $2 trillion to $4 trillion in annual damages. By 2025, the world is already experiencing a permanent GDP reduction of roughly 1% to 3% compared to a baseline economy without climate change, driven by intensified extreme weather and health costs from fossil fuel emissions.
  • 2050: $38 trillion in annual damages. Experts project a 19% to 20% reduction in global GDP by mid-century regardless of aggressive future emission cuts, as past emissions have already locked in these near-term economic shocks.
  • 2100: $100 trillion to $150+ trillion in annual damages. If global temperatures rise by 3°C or more, the world faces a staggering 50% or greater permanent drop in global GDP, with certain regions experiencing near-total economic collapse.

Key Economic Impact Drivers

The total cost is a combination of direct climate impacts and the hidden social costs of burning fossil fuels:

• • Agricultural Collapse: Drastic declines in crop yields due to shifting weather patterns, severe droughts, and desertification.
  • Infrastructure Destruction: Trillions required to rebuild or relocate coastal cities due to rising sea levels, alongside damage to roads, grids, and bridges from extreme storms.
  • Health and Pollution Costs: Millions of premature deaths annually from air pollution and heatwaves, leading to lost labor productivity and overwhelmed healthcare systems.
  • Labor Productivity Loss: Extreme heat limits safe working hours, particularly in agriculture, construction, and manufacturing.

When you don’t have to cover all the costs of your product, you increase profit. When you don’t have to cover all the costs of your product, you can sell your product for less. Fossil fuels seem economically competitive with clean energy, but Big Oil is running a cheat. For all the complaining about subsidies for clean energy (much of which has also been crushed by President Big Oil Stooge), that money is a tiny fraction relative to the avoided costs the fossil fuel industry enjoys. You know who doesn’t get to enjoy these avoided costs? The rest of us—indeed, the world—because the costs of pollution sickening and killing people and the costs of high carbon emissions changing our world’s climate for the worse can’t be avoided.

It isn’t a matter of whether we should have a price on carbon. We’re already paying it.

The post The Truth About Carbon Pricing first appeared on David Guenette.

“Climate Action Policies & Pragmatism’s Two Goals: Pricing Carbon Was Our Political Potemkin Village,” is a recent post by Jim Ball and his Substack Climate Hope Together. It is an interesting post recapping Ball’s years in the “DC climate/environment/clean energy scene.” In the post he argues that the price on carbon, which was the leading policy choice of the wayback time, was heralded by neoclassical economists and that the various carbon pricing policy proposals suffered from a lack of pragmatism.

Maybe so. Of course, no one having a time machine makes such second-guessing academic. Nonetheless, acknowledging the price of carbon—and it is high!—is an essential element of the clean energy transition, if for no other reason than the issue of affordability has become linked to energy policy.

Ball’s mea culpa over his own involvement in this early thinking on carbon pricing is sincere and based on his newer understanding that driving down the costs of clean energy would have been the far better choice. Of course, to some degree, this is what Biden’s IIJA and IRA were doing, but that came along about two decades later.

He puts it this way (emphasis his):

Well, I was wrong.

But there were a few folks who got it right back then who were part of a small, new DC think tank that wasn’t completely caught up in groupthink: ITIF, the Information Technology and Innovation Foundation.

They were focused on the price part, but they flipped the script. Instead of making the bad stuff cost more, let’s make the good stuff cost less.

But of course. The weird thing is that the fossil fuel—“bad stuff”—does cost more and has been exacting a terrible price on the world. Don’t get me wrong—coal and oil and natural gas (a.k.a., methane) are great improvements over wood and the explosion of human population would not have been possible without the Industrial Revolution and fossil fuels. You can argue that the Earth would have been better off without an explosion in human population, considering that biodiversity loss and climate change have taken big hits from human population growth. I, for one, have no interest in figuring out which individuals made possible with the vastly expanded energy wealth that fossil fuels brought to the human race should be asked to leave the stage of human existence. That’s one of the problems with de-growth thinking, where humans are intrinsically thought of as some sort of planetary virus, whereas figuring out how humans can better steward the world in which they live seems the more interesting approach.

The fact is that until fairly recently fossil fuel has been a requirement to keep people alive, whether through expanded agricultural land use or energy to support science, medicine, shelter, and employment, along with so many other things. But it is now irrefutable that mankind’s use of fossil fuel has come at a cost. That cost is that we’ve managed to screw up the planetary systems through the burning of fossil fuels on a massive scale for now hundreds of years, and we’ve just started realizing there’s the bill coming due.

I’m arguing that realizing the real cost of fossil fuels isn’t us “making the bad stuff cost more.” The bad stuff has always cost more—much more—than we’ve been pretending and it’s time to stop pretending.

Pragmatism is a Two-Way Street

As an economy, not only have we ignored the real cost of fossil fuels, but we’ve also been pretending that fossil fuel is cheap, even while direct government subsidies and policies have artificially lowered the price of fossil fuel. We’re happy enough to celebrate every penny drop in the price at the gas pump, albeit with some of us feeling guilt. I recently posted on my website “Over-Complicating Climate Change Progress,” [ https://davidguenette.com/over-complicating-climate-change-progress/ ] and there’s a header in this post titled “Understanding the Progress Underway and that Doing Nothing Is the Far More Expensive Choice,” and here’s part of that section that addresses the real costs of gasoline at the fuel pump:

One thing I’d love to see is the correction of the biggest failure for climate progress, which is ignoring our bullshit pricing of oil. Fossil fuels should carry the costs and consequences of their production, protection, and use, or what are referred to as “externalities.” Thanks to sneaky indirect subsidies, fossil fuels escape accounting and paying for the damages their product causes, an exceptional condition among businesses that usually include the cost of their product in the market price.

So, let’s learn to talk about the real costs of fossil fuels. Let’s try to get this talk into the political discussion, especially at this time of affordability as an election issue.

Fossil fuels are actually very expensive. The price at the pump doesn’t cover the actual costs. Here is an AI Summary table that addresses actual cost of a gallon of gas at the pump. Before you jump on me for providing something generated from AI, please understand that I know the sources and the arguments and that the exact and precise numbers are too complex to pin down to anything other than a range. Still, the table is convincing:

Pricing Scenarios: Current vs. True Cost

The table below highlights how different economic frameworks alter what you would actually pay at the pump to clear these hidden debts.

First, please note that this analysis was run before the Iran war further spiked pump prices. Second, before someone accuses me of sloppy math, I’m happy to admit fixing the exact cost on any particular application of fossil fuels is herculean. Fortunately, there’s no need for exactitude, which is why the above table has ranges. Want to argue the cost ranges? Fine. Make your case or leave it up to bureaucrats and technicians to assess for better specificity. But what is beyond question is that the cost of fossil fuel production and use is high and getting more expensive by the hour.

Moral Power : People Power : Staying Power

Ball’s post ends up a call for the Climate Movement (capitalization his) to heed the “magic word: pragmatism… and when it comes to legislation, our value of pragmatism has two goals: what works, and what can pass.”

I suspect a carbon fee and dividend approach is one workable way to start pricing real costs into fossil fuels while alleviating the poor of the additional cost burden, but there are other options. For instance, the federal government has built big things: There’s the TVA, and rural electrification, the moonwalk, the Manhattan Project, the Interstate Highway System, and any number of big wars (well, two!). We have a history of undertaking big projects in America and admittedly figuring out how to assess and price carbon sounds like a big project. Other examples of big projects are Biden’s IIJA and IRA, which were good starts and which should be revived, although there’s lots more than just carrots to consider.

Let’s also keep in mind that while Big Oil is powerful, its access to money (while impressive, as we all know) pales compared to what the United States can bring to bear. When it comes to carbon pricing, a good start would be eliminating direct subsidies and accounting for externalities. If Big Oil isn’t up to it, they can face lawsuits that likely will (unless sandbagged by the current SCOTUS) cost them a whole lot more of their obscene profits than a rational and ordered program for accounting for fossil fuel costs. We’re paying a high price in numbers of deaths and an increasingly threatened world, so let’s insist on a goddamn accurate invoice.

Hell, there’s even nationalization to consider since it is clear that the fossil fuel industry needs to phase out over time, but today there’s little sign of that from the big corporations themselves. In fact, there are plenty of indications that Big Oil is happy to threaten the economy with a massive wave of stranded assets by building (or trying to build) more and more gas generators, no doubt hoping that their business of selling stinky molecules continues well past the planet’s sell-by date.

Basically, Big Oil is a big punk.

The climate movement—which today is also the democracy movement and the affordability/energy wealth movement—needs to start telling the truth about fossil fuel costs. There’s nothing easy about any of this, but the oppressive expense of using fossil fuels is part of the real story of the clean energy transition. Fortunately, we have established a better alternative to fossil fuels to build the world’s energy wealth and the advantages of clean energy are multiplying by the second: cheaper, safer, faster, smarter, and more likely to support a stable international order and fewer resource conflicts.

The rest of my advice on how to establish a perfect world?

Stay tuned, of course.

The post Price on Carbon is Pragmatic Because It Reflects Reality first appeared on David Guenette.