Ari Brouillette: The treasury secretary and the Swedish girl
Treasury Secretary Steven Mnuchin was recently asked about climate activist Greta Thunberg’s call for divestiture from fossil fuel stocks.
His answer was unsurprisingly blunt, “After she goes and studies economics in college, she can come back and explain that to us.”
What, after all, could a teenage girl be expected to know about the complex world of finance and energy? Mnuchin is of course a Yale graduate, former Goldman Sachs executive, and hedge fund CEO, tasked with guiding the world’s largest economy safely through these increasingly turbulent economic times. Surely economics, the so called dismal science, could identify which of these opposing figures holds the correct view. Do fossil fuels hold the key to continued economic expansion or are they dangerous relics of the past that require immediate replacement?
Luckily for us the answers are readily apparent, a kind of Economics 101 reveals the answer.
Firstly though, it must be acknowledged that the ability to harness fossil fuels has produced generations of unprecedented global economic expansion. This expansion has been made possible by cheap and plentiful fossil fuels that enabled amazing leaps forward in economic productivity. One simple calculation helps explain this advantage of fossil fuels, it has been estimated that a single barrel of oil enables that same amount of economic productivity as roughly 23,000 human labor hours.
Imagine the consequence of this to industry. To stay within the fossil fuel economy, there were in our recent history, entire towns comprised of coal miners whose job it was to manually mine coal and bring it to the surface. The introduction of industrial-sized mining equipment capable of shifting from tunnel-based mining to open-pit mining introduced a massive fossil fuel derived efficiency. The amazing advantages presented by this fossil fuel automation reduced the amount of employees required by a massive degree. In fact, open-pit mining was often shown to yield more than 11 times more coal per employee than the older methods of extraction. And despite such instances of disruptive fossil fuel automation, unemployment remains a relatively small problem in many thriving modern economies.
What then could compel us to transition away from these amazing fuel sources?
Adam Smith’s “The Wealth of Nations,” although authored in the 18th century, still serves as a largely undisputed foundation for modern free-market economists. The treatise itself acknowledges a concept in free markets which is referred to as “negative externalities,” these are costs which occur outside of an economic activity. Reverting to our prior example we can clearly see that coal mining has externalities which negatively impact public goods such as our air, water, biodiversity, and the climate itself.
Whether we participated in the mining activity or utilized the power derived from that activity we collectively incurred an expense in the form of multiple negative externalities. It would have been impossible in Smith’s time to calculate such negative externalities or for him to appreciate them as possibly existing at a scale that endangered whole societies or even the wellbeing and future survival of the human species. This is no longer the case. John Michael Greer’s 2011 update to our economic knowledge was thus aptly titled, “The Wealth of Nature: Economics as if Survival Mattered.” Modern science and even free market economists can now clearly see the true costs and existential dangers posed by our fossil fuel industries.
A single barrel of oil emits 0.43 tons of CO2 when combusted and is associated with a wide range of externalities from localized air pollution to globally impactful greenhouse gas emissions. Climate change costs alone seems to be around $19 per barrel of oil. Roughly 93 million barrels of oil are consumed each day. The International Monetary Fund has issued a report which calculated that fossil fuels cost taxpayers and consumers $5.3 trillion each year. Renewable energy technologies have matured to the point that they often present a much lower overall cost than their fossil fuel competitors, many times even without externalities included in the calculation.
The answer then to the original question is quite simple.
Greta Thunberg could indeed decide to take Mnuchin’s advice to study economics at college and get back to us with an answer regarding the appropriateness of divesting from fossil fuel companies, but we could also reasonably expect her answer to be the same. It turns out that a teenage girl from Sweden can have a valid and alarmingly accurate appraisal of our current situation.
Fossil fuels are a bridge, not a destination. They have served a purpose and their time is over. Today, the cost to build new wind and solar has already fallen below the cost of current coal power generation. Our current national leadership is fighting these obvious truths by attempting to subsidize fossil fuel industries and at the same time lessening incentives for renewable energy industries. Mnuchin and much of the current administration is like the last tier of a pyramid scheme to get paid out, extolling the virtues of a system whose real price will be paid by younger and more vulnerable generations.
This willful ignorance of science and even free market economics presents a real and growing danger to all of us.
We have been blessed to call this wonderful region in the Sierra our home and it is our clear duty to lead where our elected leaders have failed to do so. Given the answers provided to us by science and by economics we must now begin to transform our homes, our transportation, our places of employment, our food systems, our whole societies around new sustainable energy solutions.
It may be too late for the Steve Mnuchins and Donald Trumps of the world to see and embrace these new truths, but we don’t have that luxury.
Ari Brouillette lives in Grass Valley.
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