There are plenty of barriers that complicate the world's necessary transition from fossil fuels to clean energy. Examples include the strength of the fossil-energy lobby, a lack of political will, distortions in energy markets, fossil-fuel subsidies, and how deeply rooted coal, natural gas, and oil are in the economies of the world's wealthiest nations.
However, these barriers are surmountable if we learn to count. Bad math has driven the world's energy policies for 270 years since coal began firing the Industrial Revolution. The transition to clean energy requires us to count differently.
The new math is based on three rules. First, count everything. Second, count it from cradle to grave. And third, stop distorting market prices by subsidizing fossil energy production and consumption.
The prices we pay for fossil fuels today are nowhere near their actual costs to society, the economy, and the environment. As every economist knows, many of the actual costs of these fuels are "externalized" – paid by somebody other than the fuel's producers or consumers.
The price we pay at the petrol pump or on our electric bills does not reflect the enormous costs of global climate change. Instead, those costs are paid by the victims of weather disasters, insurers, or taxpayers who foot the bills for disaster recovery.
The victims of lung diseases from air pollution pay, too. The United States implemented its principal law against air pollution in 1970, but 4 in 10 Americans still live where it's dangerous to breathe because of pollution from vehicles and power plants burning fossil fuels. The health-related costs of climate change and air pollution from fossil fuels are more than $820 billion annually in the United States, according to a study released earlier this year by the Natural Resources Defense Council (NRDC), an environmental organization.
According to the reinsurance company Munich Re, worldwide damages from hurricanes, wildfires, and floods made worse by global warming totaled $210 billion last year. However, only $82 billion of the losses were insured.
Energy markets will not work well until we use "full-cost accounting" that incorporates these costs in market prices. Although it's difficult to quantify some indirect costs of fossil fuels, work is underway to calculate them using a "social cost of carbon" formula.
Cradle to grave
The cost-benefit analyses policymakers, investors, and others employ to weigh the economics of fossil-energy investments must consider their performance from the time we extract them to the time we dispose of their wastes. For example, oil produces carbon pollution when we extract, process, transport, and burn it. The pipelines, trains, and trucks necessary to move oil to market all emit pollution. Strictly speaking, oil prices should also include the social and environmental costs of oil spills.
Failing to consider these costs leads to poor climate strategies. For example, the idea of capturing carbon emissions from coal and gas power plants and burying it underground enjoys broad support among policymakers. But Carbon Capture and Sequestration (CCS) does nothing to prevent the carbon pollution that coal and gas produce before and after the power plant burns them.
If we had counted those costs, carbon-free energy from sunlight, wind, and other renewable resources would have dominated energy markets long ago.
Stop subsidizing fossil fuels
The world's biggest economies have repeatedly promised to stop subsidizing fossil fuels, but they haven't followed through. The U.S. government has publicly subsidized oil for more than a century. Fossil energy companies still get tax subsidies of at least $20 billion yearly, but that doesn't count government spending on patrolling overseas oil shipping lanes or maintaining a national petroleum reserve.
The International Monetary Fund (IMF) estimates fossil fuels received government subsidies worldwide of nearly $6 trillion last year, including tax benefits and environmental costs. The IMF expects subsidies will be even higher by 2025, despite nations' pledges to end them. If we priced fossil fuels more accurately, the IMF says, the world would be on track to hold global warming to 1.5 °C—the preferred goal of the Paris climate agreement. In addition, accurate prices would add nearly 4% to global GDP and prevent 900,000 deaths from air pollution.
Needless to say, that money would be much better spent on clean energy in developing and developed nations.
There is a lot of conversation about making carbon pollution more "transparent" in the decisions energy companies, policymakers, national leaders, and investors make. But the actual costs fossil fuels impose on the world will never be clear until we use full-cost, life-cycle accounting. And if we continue using faulty math, so-called "solutions" like CCS in power plants will greenwash fossil fuel consumption while claiming to prevent carbon pollution.