Burning Down the House: The Shocking Economics of Energy

Imagine if Mitt Romney’s sons burned through their entire family fortune in less time than it takes to watch Titanic in 3D. That would be crazy, right?

But that’s exactly what we’re doing when it comes to energy: we’re burning our inheritance instead of collecting our income.

We don’t normally see it expressed in these terms. Yet a quick look at the most basic facts about energy make it clear that we’re getting the fundamental economics here horribly wrong.

How Fast Are We Burning Our Solar Inheritance?

Turns out, over 94 percent of the energy that powers the world economy each year is originally solar. No surprise, as the sun is an enormous nuclear fireball a million times larger than earth that’s been heating the entire planet for billions of years and sustaining all life, right?

This solar energy comes in two forms. Our solar income is the amount of energy we get from the sun each year in various ways: solar, wind, hydropower, biomass, etc. Our inheritance is the accumulated solar energy living creatures have collected over eons that have now become fossil fuels: coal, oil, natural gas.

Plants and animals absorb solar energy directly by photosynthesis, and indirectly by eating plants or other animals. The Department of Energy says fossil fuels were formed over 300 million years or more as that solar energy was squeezed out under enormous pressures, turning carbohydrates into hydrocarbons.

But if it took 300 million years to store all this energy and we burn it all in 300 years – then we’re literally burning through our inheritance a MILLION times faster than it was created.

To understand how insane this is, imagine if it happened to your family.

Burning Down the House

Imagine your great-grandparents and their children worked hard to build a successful family business. They passed it to your parents, who grew the business into an empire, and built an enormous mansion for you to grow up in. Imagine you took over the family business and through years of hard work accumulated a massive inheritance for your children. Imagine you took that wealth, painstakingly collected by your family over 100 years, and passed it to your children.

Now imagine your kids threw a massive party and burned through their entire inheritance in a single hour.

There’s no way anybody would call this good financial planning or responsible stewardship. But it’s exactly what we’re doing.

Even worse, not only did your kids burn down the beautiful mansion your ancestors built, but their giant bonfire polluted the atmosphere, fouled the water, killed off the animals, drove their neighbors from their homes and poisoned their neighbor’s children.

And the cruelest irony of all, is that to make this metaphor complete, you also gave your children an enormous income large enough to satisfy their every desire dozens of times over. Because according to Scientific American the amount of solar income “readily available for generating renewable power” is a whopping 35 times more energy than the roughly 16 Terawatts we need to power the entire global economy. Here’s a few recent studies showing this would only cost around  one to two percent of GDP.

The Shocking Economics of Energy

So on the one hand, we’ve got an enormous income that comes in a variety of forms we can harvest – wind, sun, hydropower, biomass. On the other, we’ve got an irreplaceable inheritance that belongs to our children and grandchildren as much as it belongs to us.

The basic science here is neither complicated nor controversial. But the basic economics are shocking: we’re burning through our inheritance so fast it’s literally like a bomb going off on a global scale.

The truth is there’s nothing conservative about “Drill Baby, Drill.” When Congress votes to give tax breaks to profitable oil companies instead of clean energy, they’re getting the basic economics staggeringly wrong. When we subsidize fossil fuels by hundreds of billions of dollars a year, we’re literally paying bonuses to wealthy companies to destroy our children’s future.

Irreplaceable Gifts

The Founding Fathers believed we are endowed with inalienable rights. I believe we are also endowed with irreplaceable gifts. The only responsible way to use these gifts is to invest some of our massive solar inheritance in building a sustainable energy income for future generations. To secure a prosperous future for our children, we must build an economy powered by harvesting fresh fuels not burning fossil fuels.

Consuming an inheritance we didn’t create, while neglecting an income we desperately need is not only crazy, it’s unsustainable. We don’t just need economists and politicians to understand this. It’s something we must all understand.