Energy, Climate Change and Finance: The Bottom Line

As someone who teaches and writes about energy, climate change and finance, I am often asked, “What is your bottom line?”  Can we move to an all renewables energy economy in the reasonably near future?  That question has an easy answer – no.  For those who want a more detailed answer, see Cornell (2019a, 2019b).  To cut to the chase, the basic laws of physics imply that hydrocarbons have properties that are just too beneficial for humanity to forego their use in the near future.  For instance, are you willing to give up air travel?  Given the massive amount of reliable, on demand, energy that the U.S. and world economy requires, getting off fossil fuels will be a long process fraught with numerous compromises. The fact that fossil fuels will be a big part of the economy for decades does not mean that their continued use is without large costs.  Yes, the planet will warm, the oceans will rise, weather will become more extreme, extinctions will accelerate, immigration will explode, along with all the other things about which environmental experts warn us.

The bottom line is that the next 80 years leading up to 2100 are, by necessity, going to be characterized by a messy compromise between significant continued use of fossil fuels and adaptation to their negative consequences.  There will be major increases in the use of renewables, but not so major as to avoid the compromise.  In addition, renewables will bring their own compromises in terms of extensive land use, massive mining requirements to produce batteries, and the need for an enormously expensive investment in infrastructure to name just a few.  Part of the trade-off will involve addressing some morally and politically sticky topics such as population control and limits on immigration as climate change forces more people to move.  In addition, given the huge requirement for reliable energy, all sources of possible power, including aggressive redevelopment of nuclear power, should be on the table.

One thing that will help is facing the fact that the only practical solution is a messy compromise and to stop injecting moral grandstanding into energy policy such as by demonizing oil companies or trumpeting one’s own personal “greenness.”  We don’t use fossil fuels to the large extent we do because of profiteering by oil companies or actions by unscrupulous politicians.  We use fossil fuels because they are so useful.  They make possible things like commercial air travel and drive the production of an untold number of products.  The atomic structure of fossil fuels makes them a particularly good source of energy storage.  Mills (2019) calculates that it takes 2,000 pounds of Tesla batteries costing almost $200,000 to store the energy equivalent of one barrel of oil.  I could go on and on, but you get the point.

In addition, we use fossil fuels because renewables are not as renewable as one might hope.  Mills (2019) reports, building one wind turbine requires 900 tons of steel, 2,500 tons of concrete and 45 tons of non-recyclable plastics.  All those inputs require fossil fuels for their production.  Battery production, a critical part of reliable storage for electricity produced from renewables, is energy and natural resource intensive.  These, and dozens of similar considerations, are all part of the messy trade-off.

The source of energy that involves the least environmental compromise is conservation.  In his iconic book, Sustainable Energy – Without the Hot Air, David MacKay (2009) listed the steps that individual citizens could take to conserve energy.  They are, in order of importance:

  1. Stop flying.
  2. Drive less, drive more slowly. Even better use public transportation.  Better yet, cycle or walk.  This may require moving your residence.
  3. Adjust the thermostat so that the temperature is no higher than 65 degrees in the winter and no lower than 78 degrees in the summer.
  4. Don’t buy clutter. Avoid packaging.
  5. Eat vegetarian, six days out of seven.
  6. Change all lights to LEDs.
  7. Keep using old gadgets like phones and computers. Don’t replace them early.

The list makes it clear why many people are not going to be enthusiastic about conservation once they understand what is involved.

The need to manage a messy compromise is why virtually all economists favor a carbon tax.  In January 2019 a group of forty leading economists, including all living Noble Prize winners, issued a statement calling for a revenue neutral carbon tax.[1]  As the statement emphasizes, a carbon tax allows the market to work by properly balancing the negative environmental impacts of the use of fossil fuels with their benefits.  Of course, this requires setting the price of carbon properly, but there is active research in that area involving the use of integrated climate economic models, developed originally by recent Nobel Laurette William Nordhaus, that have been refined over decades.  Nonetheless, carbon taxes face the same hurdle that conservation efforts do, they force people to confront the costs of adjusting to climate change directly.  That confrontation is necessary, but not pleasant.  Part of real political leadership will be helping people to recognize just how much energy we use and just how difficult and expensive the transformation to a more renewable world will be.

Finally, in saying that the decades ahead will involve a messy compromise that includes the continued use of fossil fuels, I do not mean to denigrate the energy related research that is ongoing.  There have been hundreds of creative ideas and there will be hundreds more.  Nonetheless, the daunting issue remains scale.  Until you have spent a significant amount of time working with the numbers, it is hard to appreciate how many of us there are and how much energy we use.  In the years ahead, there will be even more of us, a greater fraction of whom will aspire to energy intensive lifestyles.  That scale requires that we work together to explore every opportunity in the energy space without undo moralizing or political grandstanding.






Cornell, Bradford, 2019a, Energy and investing,

Cornell, Bradford, 2019b, Energy, climate change and finance: 2019 update,

MacKay, David, J.C., 2009, Sustainable energy – without the hot air, UIT, Cambridge, England.

Mills, Mark, 2019, The “new energy economy”: An exercise in magical thinking,

[1] See