oil is too expensive

The cost of maintaining the global fossil infrastructure vs. a renewable energy system

Remember the Stern Review?

The Stern Review, commissioned and published by the British government in 2006, estimated that annual investments of 1% of global GDP would be required to avoid the worst effects of climate change.

Or that we cannot afford the renewable energy infrastructure required to avoid the worst impacts of climate change?

Which suggests that the alternative to renewable energy – the current fossil-based energy infrastructure – is available for free, or at least very cheap.

The current fossil energy infrastructure is not for free. And it’s not cheap, either. In 1995, global expenditure for energy consumption amounted to 0.86% of the World GDP. In 2013, that figure stood at 1.43% - an increase of 0.57% of World GDP. That’s equivalent to U$ 2’778 billion. 
Analysis of past energy data and computing the futureglobal costs of energy usage under different scenarios - a busines-as-usual scenario vs. an energy Marshall Plan - reveals

  • The lack of a meaningful alternative to the fossil energy system gives fossil energy carriers a monopoly situation.
  • Renewable energy is fast becoming cost competitive, and in some cases (wind power), is already cheaper than fossil alternatives.
  • Renewable energy cost of other technologies, including storage, could be reduced drastically with economics of scale (investment-induced mass production and application)
  • At the same time, fossil energy carriers have to be extracted from more challenging locations (tar sands, ultra-deep sea, fracking, arctic drilling, etc.), i.e. costs of fossil fuels are rising.
  • This lack of alternatives to the fossil energy system led to increased global energy expenditure from 0.86% of World GDP in 1995 to 1.43% in 2013 due to higher fossil energy costs.
  • Had we initiated an energy infrastructure transition in the 1995, we would have an alternative by now. The opportunity cost of not having made those investments (i.e. additional cost of the fossil infrastructure incurred since 1995), 0.57% of World GDP, is equivalent to U$ 2’778 billion. In 2013 alone.
  • Not investingin large-scale renewable energy development and infrastructure NOW will cost us and additional U$ 500 billion in 2020, in excess of U$ 2’500 billion by 2025, and more thereafter. Every single year.

Stern was wrong. It will cost us 1% (or more) of global GDP NOT to take action - and that is before we consider the actual impacts of climate change and increasing extreme weather events.

For more information, download the Global Energy Scenario Report.

Development of gloabl energy consumption and global expenditure for energy  1995-2013: Cost increased much faster than consumption

Source: BP, IMF

Global energy expenditure rose from 0.86% of World GDP in 1995 to 1.43% in 2013. The difference is equal to U$ 2'778 billion

Global enegy expenditure development busines-as-usual (fossil) and Marshall scenario (renewables) to 2040

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