Are Cheap Fossil Fuels A Boon To The World’s Poor?

How can we make life better for the world’s poor? Environmentalists often tell us that one way would be to slow climate change by cutting fossil fuel use. They warn that the poorest people in the poorest countries are likely to bear the brunt of rising sea levels, droughts, and storms. Carbon taxes or other policies that would raise the prices of fossil fuels would help by reducing demand for coal and oil and spurring investment in green alternatives.
 
Skeptical environmentalist Bjørn Lomborg seems to think otherwise. Writing recently in favor of a modest carbon tax as one component of climate change policy for the developed world, with an emphasis on raising funds for clean energy research as much as on providing an incentive for conservation.
 
What about poor countries? Would it be enough for them to end outright subsidies of fossil fuels, or should they also impose taxes or use other policies to raise energy prices above the unsubsidized market price to reflect their local and global environmental harms? I think the case for higher fossil fuel prices applies to poor countries as well as rich ones.
 
First, remember that most fuel, even in poor countries, is consumed by households whose incomes are relatively high. Higher prices would give them meaningful incentives for conservation in transportation choices, construction practices, and industrial technologies.
 
Also, as in wealthier countries, fuel taxes could provide revenues to support targeted programs for helping the poor in ways that are consistent with sound environmental policy. Where indoor air quality is the problem, some of the revenues from fuel taxes could go toward electrification and toward cleaner and more efficient stoves for burning traditional fuels. Where use of wood as a household fuel is a cause of deforestation, as it is in some poor countries, fuel tax revenues could be spent partly on bringing electricity, gas, and other clean energy to poor neighborhoods and partly on reforestation and conservation.
 
Where Lomborg is right
Although I think Lomborg’s recent piece goes off the track in many respects, he is, as usual, right about some things. In particular, I agree with these two closely related points: That we are unlikely to see fossil fuels fully replaced by green energy anytime soon, and that both advanced and developing countries need smarter energy policies.
 
Unfortunately, those parts of his message are likely to be obscured by the headline that the New York Times put on his op-ed:  “The Poor Need Cheap Fossil Fuel.”  That headline is an open provocation to environmentalists and an aid and comfort to the affordable energy crowd.
 
Let’s try reconciling all of the themes raised in Lomborg’s article and in my comments by reframing them in this way.

• Yes, fossil fuels are going to be with us for a while. For that reason, a smart energy policy needs to focus on shifting the mix of fossil fuels, so far as is possible, to relatively clean natural gas and away from relatively dirty coal, while also keeping the pressure on for energy conservation across the board.
• Price signals are one way to keep the pressure on. A carbon tax is a somewhat crude way to penalize relatively dirty fuels, in that climate change is not the only issue. We should be concerned, too, about sulfur and mercury from burning coal, urban air pollution from gasoline and diesel fuels, and local environmental risks of fracking for natural gas. Still, a carbon tax serves at least roughly to penalize the dirtiest fuels the most.
• And yes, no environmental policy is going to be successful politically if it is seen as a matter of saving the earth versus helping the poor. Fuel subsidies have to go, since, realistically, they are a burden, not a boon, to the poor, but at the same time, some of the budgetary economies from the elimination of subsidies and some of the revenues from carbon taxes should  go toward smarter policies to help the world’s least advantaged.

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Those ideas might help point us toward policies that are good for both the poor and the planet.

Original post

Written By: Ed Dolan