Energy Shift: Interesting for different reasons

People occasionally send me things they would like me to blog about. Edmund sent me some fascinating articles about the Kurdish feminist fighters in Turkey and Iraq, who have pushed back all manner of foes including ISIL.  I’ve yet to do the research on this complex story to present it well.

GPaul recently dropped two articles on me which he thought were worthy of note and, while I agree with him, it might be for different reasons.

The first is about a new IMF study, which shows fossil fuel industry “subsidies” exceed $5 trillion per year.  For comparison purposes, this is about 1/4 of the entire national product of the US.  It is also slightly more than all the countries of the world spend together on health care.

The conventional radical thinking here would be: End the fossil subsidies and the market will take us to a renewable future.

But this is hardly new news.  There have been all manner of studies of direct and indirect fossil fuel subsidies, including by the IMF which released a report with similar findings in  May of this year.    What is news, is who did it and how they did it.

The IMF, usually with its partner the World Bank, has been involved for decades in making global infrastructure investments.  This generally means support of the fossil fuel industry (fortunately not nuclear reactors).  What this report represents is a departure from the IMF’s traditional lending scheme.  It is, in essence, an admission of a mistake.

IMF:  “We used to fund fossil fuel infrastructure projects. Now we recognize that direct and indirect subsidies to this sector are creating tremendous climate damage.

The other thing which is interesting about the IMF study is that it includes health effects of the fossil fuel industry as part of its estimated costs.  On one level, this is hardly surprising.  Good economists and analysts attempt to be robust in their cost accounting.  And this includes “externalities”.

It keeps the place warm.

In economics, an externality is the cost or benefit that affects a party who did not choose to incur that cost or benefit. – Wikipedia

If your next door neighbor plays just your type of music, that is a positive externality.  If your up river neighbor pours poison into the river, when you drink it, you will die.  This is a negative externality.

Industrial capitalism is all about manipulating the externalities.  Your coal mine is dirty?  Move it to a place with no environmental controls.  Your sweatshop is killing workers?  Be sure to locate it in a country which won’t make you liable for that problem.  What capitalism thrives on is the notion at negative externalities can be ignored. “We don’t have to pay for these problems we create, therefore we can give greater value to our shareholders.”

The IMF is saying, “When we are looking at the economic effects of fossil fuels we need to consider the externalities, including human health.”  This is a rare assault on the very foundations of capitalism.  This is an economic model the IMF is sworn to protect and advance.

The second article is about Uruguay going 100% renewable.  This is lovely, we want lots of places to do this.  But Uruguay is not the first country to propose such a shift. Iceland did it in 1998.  Albania and Paraguay are doing it using their ample hydropower resources.  What make this story exciting is how the Uruguayans did it.  They did it  much the same way the Germans did.

Giant Wind Turbine Rotor being delivered in Uraguay

You do it by looking at green energy generation as an economic problem rather than a technical problem.  The hardware is out there and key to getting it installed is protecting investors.  Like Germany did with its Energiewende policy.  Germany protected investors in renewables by making sure they did not lose out when electricity prices fluctuated.  Uruguay followed suit and the world got better.

“What we’ve learned is that renewables is just a financial business,” Uruguay’s Méndez says. “The construction and maintenance costs are low, so as long as you give investors a secure environment, it is a very attractive.”

The results? Uruguay has cut its carbon footprint without government subsidies or higher consumer costs.  Renewables provide 94.5% of the country’s current electricity and inflation adjusted electricity prices for it are lower than in the ten years ago.

The US could do this as well, if the fossil and nuclear bound utilities did not control the state legislatures.