As students of economics, these really are crazy times we are living through! From governments paying private sector wages to 0% interest rates, to toilet paper shortages, the latest to add to this list is the environment’s least favourite energy source becoming the most expensive on the global market!
That’s right. Coal, the dirty, smelly, air destroying fossil fuel has just become the world’s most expensive. If that isn’t a strong incentive to stop burning it and pouring CO2 into our atmosphere, I don’t know what is.
Usually when we talk about the most expensive of something it is following some demand driven price surge. For coal, this is far from the case. The price of coal has actually remained relatively stable in recent weeks at around US$66 per metric ton.
This top price ranking is mainly a result of the oil price crash and the much cheaper alternatives in renewable energy. Most of which attribute their lower prices to generous subsidies from governments around the world attempting to encourage greater use of green energy sources.
With coal also claiming the title as the globe’s dirtiest fossil fuel, emitting double the amount of CO2 as natural gas and 30% more than crude oil, environmental activists will be hoping that this will incentivise more action towards protecting the environment and avoiding the external costs of burning coal.
Even with strong demand in emerging economies throughout Asia, the relatively high price will hopefully encourage manufacturers to switch their energy sources, choosing cheaper and less damaging alternatives. Let’s hope the price of coal stays high!
THINK LIKE AN ECONOMIST!
Q1. What is meant by the term external cost?
Q2. Explain one external cost of burning coal.
Q3. Explain how subsidising the renewable energy sector encourages further production and demand.
Q4. Assess the impact that the relatively high price of coal is likely to have on reducing the global demand for fossil fuels and encouraging the use of renewable energy sources.
Click here for the source article
