The main rationale for these subsidies is that wind and solar produce, to use the economic term of art, “positive externalities” — benefits to society that are not captured in their market price. Specifically, wind and solar power reduce pollution, which reduces sickness, missed work days, and early deaths. Every wind farm or solar field displaces some other form of power generation (usually coal or natural gas) that would have polluted more.
Subsidies for renewables are meant to remedy this market failure, to make the market value of renewables more accurately reflect their total social value.
This raises an obvious question: Are renewable energy subsidies doing the job? That is to say, are they accurately reflecting the size and nature of the positive externalities?
That turns out to be a devilishly difficult question to answer. Quantifying renewable energy’s health and environmental benefits is super, super complicated. Happily, researchers at the Lawrence Berkeley Lab have just produced the most comprehensive attempt to date. It contains all kinds of food for thought, both in its numbers and its uncertainties.
(Quick side note: Just about every country in the world also subsidizes fossil fuels. Globally, fossil fuels receive far more subsidies than renewables, despite the lack of any policy rationale whatsoever for such subsidies. But we’ll put that aside for now.)
Here’s how much wind and solar saved in health and environmental costs
The researchers studied the health and environmental benefits of wind and solar in the US between 2007 (when the market was virtually nothing) and 2015 (after years of explosive market growth).
Specifically, they examined how much wind and solar reduced emissions of four main pollutants — sulfur dioxide (SO2), nitrogen oxides (NOx), fine particulate matter (PM2.5), and carbon dioxide (CO2) — over that span of years. The goal was to understand not only the size of the health and environmental benefits, but their geographical distribution and how they have changed over time.
To cut to the chase, let’s review the top-line conclusions:
- From 2007 to 2015, wind and solar in the US reduced SO2, NOx, and PM2.5 by 1.0, 0.6, and 0.05 million tons respectively;
- reduction of those local air pollutants helped avoid 7,000 premature deaths (the central estimate in a range from 3,000 to 12,700);
- those avoided deaths, along with other public health impacts, are worth a cumulative $56 billion (the central estimate in a range from $30 to $113 billion);
- wind and solar also reduced CO2 emissions, to the tune of $32 billion in avoided climate costs (the central estimate in a range from$5 to $107 billion).
That number is worth reflecting on, but first let’s talk a second about how they came up with it.
Uncertainties abound in measuring positive externalities
Tallying up these benefits is difficult for all sorts of reasons.
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These ranges reflect the simple fact that different models weigh things differently, from the physiological impacts of pollution to the value of missed work. This is part of what muddies the politics of environmental regulation: Costs are specific and concentrated; benefits are uncertain and diffuse.
Wind and solar benefits vary over time and from place to place
If you dig into the paper, you find that the most interesting data has to do with the variations in benefits across regions and over time.
It’s complex, but in a nutshell, the health and environmental benefits of wind and solar vary depending on what other sources are being displaced, and how much, and when.
... while the absolute level of subsidies might match the absolute level of benefits, they do not line up on a granular level. The health and environmental benefits of wind and solar vary widely by time and region, but most policy incentives for wind and solar do not. Federal tax incentives treat all wind and solar projects the same. And when subsidies do vary, as in state-level policy, it’s rarely connected to their varying benefits.
The conclusion the researchers draw from this subsidy mismatch is that “addressing air quality and climate change through policies directly supporting wind and solar is not necessarily the most cost-effective approach.”
That’s true, as far as it goes, though I think there are still plenty of good reasons to support wind and solar. What’s fun, though, is to think about what it might look like if state and federal supports for wind and solar did vary by time and region.
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A final word on costs and benefits
In this case, as in all such cases, it is somewhat misleading to simply compare total subsidies with total health and environmental benefits. The total amounts are not all that matters. It also matters how costs and benefits are distributed — i.e., equity matters as well.
To put it bluntly: A dollar in federal taxes is not equivalent to a dollar of avoided health and environmental costs. The latter dollar is worth more than the former dollar.
Why is that? Simple: Federal taxes come disproportionately from the wealthy, via our progressive federal income tax, but health and environmental benefits disproportionately help the poor. And as any good economist will tell you, the same dollar is worth more to a poor person than it is to a rich person.
This is something that often gets lost in discussions of environmental regulations. It’s not just that their total benefits almost always exceed their direct costs. It’s that those benefits are uniquely egalitarian and progressive.
In the case of climate change, any reduction in CO2 emissions benefits everyone on Earth (egalitarian), while disproportionately helping the poor, who suffer earliest and most from climate impacts (progressive).
In the case of local air-quality benefits, cleaner air benefits everyone in the region who breathes (egalitarian), while disproportionately helping the poor, who are more likely to live in close proximity to fossil fuel power plants (progressive).
In terms of equity, converting a dollar of wealthy people’s money into a dollar of health for low-income communities seems like a good deal to me. And if you can get multiple dollars of low-income health benefit for every dollar of high-income taxes, well, that’s a no brainer.
Read more at Wind and Solar Power Are Saving Americans an Astounding Amount of Money
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