Update: My speaking notes from the Wheeler Centre talk (may contain typos etc.)
‘Coal-fired power will soon be obsolete’.
Dealing with climate change isn’t simply a scientific question that can be answered by scientists. Rather it is an economic, moral, political, and technological question too.
I am not going to concentrate on the scientific and technological issues so much as the economic and moral questions.
It is certainly the case that coal-fired power will not be technologically obsolete in the near future. Absent disruptive or Schumpeterian innovation in power generation – like nuclear fusion – coal-fired power will be with us for a long time.
The question is whether coal-fired power will be morally obsolete.
That is where morality and economics plays a role.
Economics is about trade-offs – how much of this do we have to give up to get that. We trade-off costs and benefits. When talking about fossil fuel consumption we hear a lot about costs – and it is true, the social costs of carbon are greater than zero. That, however, is not enough to argue that fossil fuel consumption is a ‘bad thing’.
The mere existence of social costs is not enough to argue that coal-fired power imposes externalities. Rather we must demonstrate that coal-fired power has greater social costs than social benefits in equilibrium.
That is a difficult challenge where the proponents of the motion will fail to convince.
According to the International Energy Agency some 68% of world electricity is generated by fossil fuel. The single largest source of fuel is coal – some 40% of world electricity is coal-fired power.
The material benefits of our modern civilisation are built on cheap and reliable energy and in practice that means coal.
To be sure, the proponents may wish to argue that our material benefits are ‘unsustainable’. But that immoral choice involves them having to nominate those people who will be denied the benefits of our modern civilisation.
- Those people who will not receive the benefits of modern medicine.
- Those people who will not receive the benefits of labour saving devices.
- Those people who will not enjoy the comforts and longevity that access to cheap and reliable energy provides.
As it is we live in a world where too many people are already excluded from the good life – the proponents want there to be more of them.
We know what a power-deprived world looks like – that is the world before the invention of the steam engine. A world where human and animal muscle powered our civilisation. That world was made possible by the invention of the whip.
So-called renewable energy existed in that world. Wind power and hydro. Yet immediately before the industrial revolution in England those sources of power added a negligible quantum of power to total energy usage.
Why? Because it is diffuse and unreliable.
That remains the case today. Environmentalists oppose the building of dams. The wind doesn’t blow all the time, and the sun doesn’t shine all the time.
William Jevons – one of the fathers of neo-classical economics made the point in 1865:
With coal almost any feat is possible or easy; without it we are thrown back into the laborious poverty of earlier times.
That remains true today as it did then.
- Who here will give up modern medical technology if we give up coal?
- Who here wants to return to a life expectancy of 36 years?
- Who here actually wants to live by the sweat of their brow?
Without access to energy-dense, abundant, versatile, reliable, and affordable coal everyone in this room will get that opportunity.
- Who here thinks the whip to be a greater invention than the steam engine?
Yes – coal power imposes costs of society, but the benefits far outweigh those costs.
A clean environment is a superior good – as our incomes rise so demand for a cleaner environment rises. That is why in western countries we have seen increased use of fossil fuels and coal over the last 100 years and a cleaner environment. 19th century England was just as polluted as modern China.
Those who argue against coal-powered electricity are engaged in what Harold Demsetz has labelled nirvana economics. They make three assumptions:
- People can be different.
- There are free lunches.
- The grass will greener on the other side.
People do not want to give up their current standards of living. People who do not share our current standard of living aspire to it. Proposed alternatives to coal-powered electricity usually constitute a free lunch. Except gas – the biggest competitor to coal is gas, especially fracking in the United States.
The proponents want us to believe in a finite world – yet the most valuable resource we have is infinite. Human ingenuity – combined with cheap, abundant and reliable energy from fossil fuels and coal – has enabled us to lift our living standards above that of animals. There is no reason to believe that human ingenuity won’t work to ensure a viable and prosperous future.
The proponents want us to believe that we are imposing huge costs on future generations. That is an open question – we cannot know what future generations will experience. We do know, however, that the proponent’s solution will deprive current generations of the very same high standard of living we enjoy.
By depriving people of access to cheap reliable and abundant energy we are not just imposing our preferences on those people, we are imposing poverty on those people.