The Economic Aspects of Switching to

Thesis

By

Kamilla Tatinbekova

Submitted in Partial fulfillment

Of the Requirements for the degree of

Bachelor of Science

In

Business Administration

State University of New York

Empire State College

2018

Reader: David Starr-Glass

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Statutory Declaration / Čestné prohlášení

I, Kamilla Tatinbekova, declare that the paper entitled:

The Economic Aspects of Switching to Renewable Energy

was written by myself independently, using the sources and information listed in the list of references. I am aware that my work will be published in accordance with § 47b of Act No. 111/1998 Coll., On Higher Education Institutions, as amended, and in accordance with the valid publication guidelines for university graduate theses.

Prohlašuji, že jsem tuto práci vypracoval/a samostatně s použitím uvedené literatury a zdrojů informací. Jsem vědom/a, že moje práce bude zveřejněna v souladu s § 47b zákona č. 111/1998 Sb., o vysokých školách ve znění pozdějších předpisů, a v souladu s platnou Směrnicí o zveřejňování vysokoškolských závěrečných prací.

In Prague, 27/04/2018 Kamilla Tatinbekova

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Acknowledgement

First and foremost, I would like to offer special thanks to my family for providing me support throughout the academic years.

Also, I would like to express my great appreciation to Professor David Starr-Glass, my thesis supervisor, for his patience, valuable and constructive suggestions and feedbacks during the planning and development of the Senior Project Thesis.

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Table of Content

I. Introduction……………………………………………………………………………….…….6

1.1 The main sources of energy………………………………………………………....6

1.2 The growing global demand for fossil fuels………………………………………...7

1.3 Environmental impacts of fossil fuels………………………………………..…..…9

1.4 Policy responses to ……………………………………………….11

II. History of energy industry……………………………………………………………………14

2.1 The use of fossil fuels in ancient times……………………………………………14

2.2 The use of fossil fuels in the modern period………………………………………14

III. Description of energies, and how the world is accessing them………………………...……18

3.1 Non-renewable sources……………………………………...……..……………...19

i) : description and cost of extraction………………………………...19

a) Oil, , Gas ………………………………………………………...19

ii) Nuclear Fuel: description and cost of extraction…………...………………...23

3.2 Renewable sources………………………………………………………………...25

i) : description and cost of extraction …………………………..…25

ii) Hydropower: description and cost of extraction……………………………...27

iii) Wind Energy: description and cost of extraction…………………………….29

iv) Geothermal Energy: description and cost of extraction……………………...30

3.3 Is nuclear energy renewable energy?...... 31

i) Arguments for nuclear as renewable energy…………………………………..31

ii) Arguments against nuclear as renewable energy……………………………..32

iii) Conclusion…………………………………………………………………...32

IV. The …………..………………………………………………………………...34

V. Economic advantages of switching to renewable energy…………………………………….37

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VI. Economic disadvantages of switching to renewable energy………………………………...42

VII. The real cost of pollution…………………………………………...…………………...….45

6.1 The air pollution……………………………………………………………………..45

6.2 Nuclear pollution……………………………………………………………….……46

6.3 The overall cost of pollution…………………………………………………………50

VIII. Conclusion and recommendations………...……………………………………………….51

Reference………………………………………...………………………………………………54

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Abstract

The primary purpose of the thesis is analysing the economic aspects of the shift to sustainable energy sources and identifying the advantages and disadvantages of the using green energy as the primary source of energy. The decrease of prices for fossil fuel alternatives and the limited deposits of oil, gas and coal make it a notional topic to analyse.

The structure of the paper is organized as follows:

Chapter 1 and Chapter 2 provides an overview of the energy market and historic background.

Chapter 3 describes the cost of extraction of renewable and non-renewable energy sources.

Chapter 4 discusses the energy crisis to highlight what are the destructive and hazardous consequences of the oil prices fluctuations of the global economy. Chapter 5 and 6 examines various economic advantages and disadvantages of the transition to the renewable energy sources. Chapter 7 provides information about the real cost of pollution caused by fossil fuels as it is considered as the hidden costs of conventional sources’ utilization

Finally, Chapter 8 discusses the results obtained in previous chapters. It summarises the paper and suggests several implications based on findings discussed in the paper.

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I. Introduction

1.1. The main sources of energy.

Nowadays we live in the world where oil, gas and coal are the primary sources of energy. Oil

is the most significant and most-traded commodity in the international trade. Therefore, the

oil industry is one of the most potent economic drivers of the world economy. Currently,

98% of the transport sector in the United States runs on ; it provides approximately

36% of the world total energy consumption and generates almost 9% of the world's

electricity (Kopp, 2006). Therefore, any changes in oil market significantly affect the world

economy. For example, substantial petroleum in the 1970s and dramatic increase of

oil prices in caused considerable economic and financial changes in the world.

1.2. The growing global demand for fossil fuels and its supply.

The fast-growing demand for road and air transport, excessive manufacturing, particularly in

developing countries, caused a shift in the demand for fossil fuels. As a result, the

consumption of petroleum is increasing exponentially. According to the International Energy

Agency (2017), people used approximately 96 million barrels of crude oil and liquid fuels

per day as of 2016. Another source indicates that the world crude oil demand grew an

average of 1.76% per year from 1994 to 2006 (Kennard and Hanne, 2015). The primary

consumers of fossil fuels are the United States, European Union, , Japan and Russia

(Central Intelligence Agency, 2015). For example, within ten years U.S. consumption grew

from 17.7 million to 20.7 million barrels of crude oil a day, where 2/3 of which was in the

transportation sector (Kennard and Hanne, 2015, p. 93). Also, Kennard and Henne, the

authors of the book “Boom and Bust: A Look at the Economic Bubbles,” states that in China

oil consumption grow by 8% annually since 2002, doubling from 1996–2006. Besides,

another factor which contributes to the high oil demand is the fact that global human

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amounts to approximately 83 million annually or 1.1% per year (United

Nations, 2017). This to the concern that there will be an urgent need in the future to

increase outputs of food production and heavy industry to provide the basic needs of all

people. Other findings are not optimistic either: world demand for oil is predicted by experts

to rise 37% over 2006 levels by 2030 (Kennard and Hanne, 2015, p. 93)

While demand is growing sharply, non-renewable energy sources such as coal, oil and

are in relatively short supply. It is a known fact that fossil fuels are finite and one

day, eventually, the global reserves will run out. For example, the says

that the rate of oil production would reach the peak and then decrease sharply most likely in

the early 1970s (Hubbert, 1956). To be precise, in a paper “Nuclear Energy and the Fossil

Fuels,” oil geophysicists King Hubbert proposed that petroleum production would follow a

bell-curved shape, increasing exponentially during the early stages of production then

slowing, reaching a peak and then finally going into final production decline.

Figure 1: U.S. crude oil production (1900-2015). Source: EIA. Link: https://www.eia.gov/todayinenergy/detail.php?id=28592

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Until the middle of the 2000s, the oil production is seemed to have a bell-shaped curve with the peak in 1970 as it was forecasted by Hubbert peak theory (see Figure 1). The graph shows that between 1970 and 2010, U.S. petroleum production dropped by nearly half as conventional wells were exhausted. However, after 2010 it began to rise afresh mainly attributable to such technological innovations as advances in horizontal drilling, , and seismic imaging (Wang and Krupnick, 2013). Moreover, it seems like the theory does not take into account such factors as geopolitics. By looking at the world petroleum production graph, it is clear that it is not bell-shaped - another evidence that Hubbert curve theory is not precise and have several shortcomings in the calculations (see Figure 2).

Figure 2: World petroleum production (1980-2014). Source: World Oil Yearly Production

Charts. Link: http://www.peakoilindia.org/2016/05/04/2553/

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Regarding the fact that fossil fuels are finite, based on BP’s Statistical Review of World Energy

(2016), humanity has approximately 42 years of coal production and roughly 50 years of both oil and natural gas remaining. Nevertheless, the numbers provided by BP’s research might be misleading because there is a possibility that the multinational oil and gas company inflated the estimates of fossil fuels. It is not profitable for oil companies to admit that reserves of non- conventional energy sources will run out soon. Therefore, these numbers might be not accurate.

1.3. Environmental impacts of fossil fuels.

Oil industry has a significant influence on the total environmental pollution caused by exploration and production operations, petroleum spillage and gas flaring. Many environment- related problems faced in the world such as acid rain, oil spill, air pollution, and climate change result from the increased human dependence on fossil fuels. The burning of fossil fuels produces gases like carbon dioxide that are capable of destroying the ozone layer, which, in turn, protects the Earth from the ultraviolet lights. It results into the current rise in the global temperature.

Mining and carbon dioxide emissions produced during the utilization and consumption of oil, gas and coal affect our fragile environment. According to the Department of Pure and Applied

Chemistry in Ladoke Akintola University of , approximately 75% of extracted gas is burned annually (Olajire, 2014). The study states that gas flaring causes severe ecological and physical damage to the soil, water, flora, and fauna because flare stacks are often situated close to the inhabited locality, and produce smudge which covers the nearby buildings and plants. The smudge is usually washed off after rains, and as a result, the black ink-like water running from the buildings’ roofs adversely affect the fertility of the soil. The damaged ecosystem of the area close to gas flares puts in danger not only people’s lives but also all living creatures. The article also indicates that the most significant environmental issues associated with the oil and gas industry include exploration survey, exploration drilling, development and production, hydraulic

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fracking, decommissioning and rehabilitation, refining, energy use and emissions to air. Spilt oil can pollute streams, rivers and groundwater, in case it is absorbed through the soil. Since drinking water supplies come from rivers and groundwater, humanity should protect them from pollution.

In addition, some people believe that the mentioned above adverse effects of using fossil fuels may to global warming, also known as climate change. The term ‘climate change’ was used for the first time in the early ages of the XIX century (Weart, 2008). At that time, it was a concept that divided scientists from different parts of the world into two groups: those who thinks that carbon dioxide emissions contribute to the pollution of the environment and those who were against to the idea that such process exists at all. Only 30 years ago with the innovation of computers and advanced the scientific community arrived at the unified opinion that greenhouse gases such as carbon dioxide, water vapor and methane produced due to the human activity cause the destruction of the ozone layer (Le Treut, et al.,

2007). At the beginning of the XXI century, the several types of research were conducted by ecologists and other scientists that changed the notion of the environment’s frailness and identified what factors contribute the pollution.

For almost two centuries humanity had been ignoring the facts that Earth’s average temperature is gradually rising, sea level is increasing, and the air is getting polluted. Not a long time ago, the international community finally recognized the importance of the global warming by identifying possible negative consequences on humanity in the future. After the World War II, countries were focused on the recovery of their economic situation and entirely ignored factors causing damages to the environmental area (DeSombre, 2005). In addition, DeSombre in his work states that the long-term scientific uncertainty and unsureness about global warming and possible costs

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associated with actions preventing destroying of nature played a significant role in the neglect of the climate change. In fact, people began to worry about protection of the Earth only in the early

1970s when the first global environment conference was conducted to give the opportunity for countries to cooperate and negotiate issues associated with global warming (Le Treut et al.,

2007). According to the article „The evolution of international environmental cooperation “, the ozone layer exhaustion was discovered in early 1970s.

1.4. Policy responses to Climate Change.

In response to the new scientific ‘discovery’, countries, which were encouraged by United

Nations Environmental Program (UNEP), adopted the Vienna Convention in order to protect the ozone layer. DeSombre also states that the important treaty of the Vienna Convention was the

Montreal Protocol, ratified by 20 states, which compelled governments to stop using particular chemical components that lead to the ozone layer exhaustion. It was a successful international treaty since the ozone layer was gradually recovering. In 1992, UN conducted one of the largest international conferences - “The Earth Summit” - in Rio de Janeiro where 172 governments discussed issues associated with environmental pollution (Brown -Weiss, 2011). As a result, the following important documents were implemented in "The Earth Summit": Agenda 21, the Rio

Declaration on Environment and Development, the Statement of Forest Principles, the UN

Framework Convention on Climate Change and the UN Convention on Biodiversity (DeSombre,

2005). In general, the UNFCCC is an international treaty which aims to linger the speed at which the Earth’s climate is changing (DeSombre, 2005). One of the significant resulting documents of

UNFCCC is the Kyoto Protocol. It is aimed to partially solve the global warming problem by compelling developed countries to reduce the carbon dioxide and other greenhouse gases

(DeSombre, 2005). Even though several states such as Croatia, Kazakhstan, and the United

States signed it, they have not ratified it yet. Moreover, Canada withdrew from treaty’s structure.

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Given the ambitious goals of the convention, the success of the Kyoto protocol is questionable

(DeSombre, 2005, p. 114). Another agreement within UNFCCC towards climate change is Paris

Agreement: on Earth Day, 22nd of April 2016, 191 states signed the Paris Climate Accord. The primary objective of the agreement is preventing the Earth to warm 2 degrees Celsius by the end of XXI century (Colacito, Hoffman and Phan, 2016). The implementation of the agreement will lead to far-reaching economic impacts on the world. The success of this initiative heavily depends on governments’ active support, especially in countries states such as United States which have strong political and legal opposition. In order to achieve this target several policies were proposed: an introduction of the carbon taxation, reducing the usage of fossil fuels, development of the clean energy solutions. In addition, the United Nations have implemented

Sustainable Development Goals (SDGs) in order to direct the world’s attention to specific issues.

The Sustainable Development Goals is a set of 17 global goals which focus on social, environmental and issues (UN, 2017). According to the United Nations.

The seventh goal is achieving the energy access for all people around the world and meet the targets of using renewable power and increasing energy efficiency. The global share of renewable energy grew from 17% to 18.3% during the last six years (UN, 2017). The policy has the positive impact on the environment because 15 largest energy consuming states have reduced their energy consumption by increasing energy efficiency in the transport section. To sum up, the United Nations is working hard on implementing policies which encourage countries to switch to green energy and reduce the share of fossil fuels.

Another example of policy focusing on environment-related issues is European Union’s 2020 climate and energy package. The package has three key targets (European Commission, 2018):

• greenhouse emissions should be reduced by 20% (from 1990 levels)

• 20% of energy generated by renewable energy sources

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• energy efficiency should be increased by 20%

The targets were enforced in 2009 by all European Union states. Regarding the progress of the policy, EU greenhouse emissions were reduced by 23% during last 20 years, and at the same time, the economy grew by 50% (European Commission, 2018). EU also stated that the progress regarding the second target is that the share of renewables in the EU energy consumption has reached 17% as of 2016. Overall, the progress of achieving policy’s goals is impressive and can be considered as the most successful environmental policy.

It is essential to understand that oil and gas industry is one of the leading producers of carbon dioxide, and in order to fully implement the policies described above, people should stop the dependency on the non-renewable energy sources. One of the alternatives to achieve this target is switching to renewable energy sources such as solar energy, hydropower, wind energy, biomass and and geothermal energy. Since any energy transition has significant impact on the global economy, the economic aspects of this transition should be carefully identified and researched.

The paper examines the economic advantages and disadvantages of using sustainable energy sources by calculating the cost of extraction of renewables and fossil fuels, its production, efficiency and concludes what the economic aspects of switching to renewable energy are in the long term. It also discusses the question of global warming and the real cost of pollution.

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II. History of energy industry

2.1. The use of fossil fuels in ancient times.

As it was mentioned above, energy market plays the significant role in the world economic prosperity. Thus, it is crucial to examine how humanity arrived at the idea of using fossil fuels as the primary source of energy. In ancient times people used numerous sources of energy to survive. Before the , people’s needs were modest: humankind used hoofed animals as the primary and almost the only way of surface transportation, and non-fuel vessels were the standard vehicle in maritime traffic. In the past, technologies were not developed at the sufficient level for the mass production of food, clothes and other basic needs. Naturally, water and wind were used as the primary sources of energy in the simple machines such as watermill, well pumps, pressure tanks which grounded the grain and pumped the water (Williams, 2006).

According to the report “The Party's Over: Oil, War and the Fate of Industrial Societies” written by (as cited in the History Timeline, 2013), people on the modern territory of

China employed coal for heating and cooking and had been used it for almost 4000 years.

Richard Heinberg also states that the first practical use of natural gas dates to 200 BCE. They used it to make salt from the salt water in gas-fired evaporators. Likewise, in early medieval

Europe, people also knew about the existence of coal. However, the 'black stone' was considered as an inferior fuel because it produces excessive amounts of smudge and smoke. Thus, until the

XIII century, it was almost ignored giving the favor to the wood. People used fossil fuels several thousand years ago, but they did not have technologies to extract the maximum energy.

2.2. The use of fossil fuels in the modern period.

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According to the article “Historical Timeline: History of Alternative Energy and Fossil Fuels”

(2013), at the end of XVI and the beginning of XVII centuries coal began to be used as the primary source of energy along with the and steel production. It was an important step in the history as it is considered as the significant shift in the industry: a new civilization developed. In other words, the use of coal and iron transformed the industry and played a key role paving the way to the Industrial Revolution. Wood, wind, water, beeswax, and tallow were displaced gradually by coal and derivatives of coal. In 1821, William Hart initiated the first drilling of the gas well in the Fredonia, New York. Since then, William Hart was called as ‘the father of natural gas’ in the United States (Natural Gas Supply Association, 2009). Despite the invention of the gas well, most of the natural gas was manufactured from coal at that time. NGSA also states that natural gas was used primarily as the source of light in the XIX century. Since storing and piping coal was onerous, expensive, poisonous and explosive, people were seeking the alternatives of coal.

According to the Alfred W. Crosby (as cited in the History Timeline, 2013) in 1859, the mining of the first commercial was made by Edwin Drake. One year later, Augustine Mouchot developed a solar-powered steam generation system to drive industrial machinery as some people were already worried about fossil fuels soon run out (Perlin, 1999). Although Augustine

Mouchot’s solar power system was not accessible at that time, it is the first significant step in developing the renewable energy industry. Ten years later, after American Civilian war when was expanding due to technological advances, John D. Rockefeller,

American business magnate, and industrialist formed Company of Ohio which was the largest consignor of oil and kerosene in the whole country (History Timeline, 2013). The business was incredibly profitable. Thus Mr. Rockefeller became the wealthiest person in the modern history (Hargreaves, 2014). According to the article “The History Timeline,” the last

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decade of the XIX century is a remarkable period since oil finally replaced coal and became the source not only in the U.S. but also in developed countries. In other words, petroleum was extracted for industrial purposes for nearly 150 years. The United States was the first country which initiated the economic production of oil in the XIX century.

The beginning of the XX century is memorable not only for the technological advancements in the machinery and military fields, but it is also considered as the birth of the modern oil industry which is dated to 1901 when ’s huge Spindletop oil field was discovered (Paleontological

Research Institution, n.d., para. 1). With the emerging development of the automobile industry and the spread of the electricity, the use of energy changed forever. According to the Union of

Concerned Scientists (n.d., para. 8), the energy use was proliferating and was doubling every decade. The article also notes that the cost of the energy production was decreasing gradually, and people did not concern about the efficiency of the energy use. The history timeline in the

Union of Concerned Scientists includes the fact that the World War II unleashed nuclear power: the government admitted the potential of the atom energy and scientists were searching the way they can use it in a peaceful way, also known as "the peaceful atom." (para.10). Eventually, they found out that it is better to be used in the electricity production. As a result, more than 200 nuclear power plants were built across the United States, and some houses were provided with electric heating systems (The Concerned Scientists, n.d., para. 10). However, the use of nuclear energy is doubtful because some people consider it as clean energy and even include it in the renewable energy source. While others point out to the terrible catastrophes such as “Fukushima

Daiichi nuclear disaster” and “Chernobyl” and the fact that ’s deposit on the Earth, which is used in the nuclear energy, is finite. The section 3.3 of the paper raises the question “Is nuclear energy renewable energy” and discusses the arguments for and against the issue. To sum up, each step of the economic development was followed by the energy transition from one

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energy source to another. In the XXI century, it becomes clear that that the next significant change in the energy market is moving from fossil fuels towards renewable energy sources. This transition is caused by numerous factors such as concerns about environmental issues like climate change, the finite resources of fossil fuel, unstable prices in the oil market, and technological changes.

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III. Sources of energy, and how the world is accessing them.

Energy sources are divided into two categories: renewable and non-renewable. Renewable energy is generated mainly from the sun, wind, water, hydropower, biomass, geothermal power and other. Non-renewable energy comes from petroleum, natural gas, coal, and uranium. Figure

3 indicates the energy consumption in the United States in 2016 with additional information in what areas each source of energy is used (U.S. Energy Information Administration, 2017).

Petroleum, natural gas, and coal dominate the energy market (see Figure 3). On the other hand, renewable energy, especially biomass, wind, and hydropower gradually enter the market.

According to statistics, in 2012, 13.2% of total came from renewable sources. In

2013, the number reached 22% (International Energy Agency, 2018).

Figure 3: U.S. Energy consumption by source, 2017. Source: U.S. EIA. Link: https://www.eia.gov/energyexplained/index.cfm?page=about_sources_of_energy

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The sections 3.1 and 3.2 include a detailed description of each type of energy sources and its value analysis. In order to determine the economic aspects of switching to renewable energy sources, it is crucial to identify the cost of extraction and utilization of non-renewable and renewable energy sources and its effectiveness from the economic point of view.

3.1 Non-renewable sources i) Fossil Fuel: description and cost of extraction

According to Federal Institute for Geosciences and Natural Resources, crude oil, coal, natural gas and nuclear fuel are classified into two categories: conventional and non-conventional

(Cramer et al., 2009).

a) Oil, Coal, Gas

Oil.

Oil is subdivided into the conventional and . The subdivisions are dependent on whether economic production is based on standard production technologies or whether new, innovative and expensive techniques have to be developed and applied. Another factor in the categorization is based on density. Conventional oil is defined physically: for example, crude oil with a density less than 1.0 g/cm³ is classified as conventional (Cramer et al., 2009). In other words, petroleum with density more than 1.0 g/cm³ refers to unconventional.

Regarding the cost of petroleum extraction, four types of costs are identified in the upstream- area of the oil industry (Cramer et al., 2009):

• Exploration costs which are usually calculated before the discovery of an oil field;

• Investment costs which include the investigation of the deposit in order to make the proper plan of the field’s development;

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• Development costs including the costs of drilling the production wells and the building of the surface installations at the oil fields;

• Operating costs including expenses of the transport facilities;

The sum of four types of cost constitutes the total costs for the whole project of the extraction.

Moreover, specific costs such as the costs for the production of a or a ton of oil are taken into account and are usually referred as an essential indicator. Since the occurrence of crude oil is located in the subsurface rocks in the depths varying from a few meters down to 4 km (Cramer et al., 2009), the development costs significantly depend on the oil’s deposit distance from the

Earth's surface.

Figure 4: Specific finding and development costs as well as upstream costs by region for FSR companies 2004-2006 and 2005-2007 in 2007 USD/boe. Source: EIA, 2008b. Link: https://www.eia.gov/finance/performanceprofiles/oil_gas.php

Regional differences for specific costs such as the finding and development costs vary across the regions. The Middle East has the lowest expenditures in both types of costs (see Figure 4).

However, the oil exporting countries such as Saudi Arabia, , and Iraq are not included in the

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table. The highest cost is in the offshore areas of the United States because of its “high daily rates for drillships and offshore platforms and the high material intensity of the producing systems” (Cramer et al., 2009, p 45). Regarding the upstream costs, the location does not have a significant impact on it (except offshore in the United States).

Gas.

Similar to the crude oil, natural gas is classified as conventional if the exploitation process is based on traditional production techniques. Extraction costs of gas and oil are roughly identical, in the sense that drilling procedure has almost the same type of well. Besides, the majority of oil wells produce "associated gas" which makes the extraction costs identical for those two types of fossil fuels. Figure 5 illustrates the change in costs of crude oil and natural gas wells drilled from the 1980s to 2005. The significant rise in costs incurred in the middle of 1980s (see Figure 5).

Starting from 2000, the costs of drilling wells began to increase massively: from $1 billion/well to $3.5 billion/well.

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Figure 5: Cost of Crude oil and Natural Gas Wells Drilled. Source: EIA. Link: https://www.eia.gov/dnav/pet/pet_crd_wellcost_s1_a.htm

Coal.

According to EIA (2017), there are four types of coal: bituminous, lignite, sub-bituminous and anthracite. The amount of produced heat energy depends on the type of carbon and its amount in the coal. The higher heat content of the coal, the higher the price. Moreover, the closer fuel to the surface the lower the cost of drilling wells. Inversely, the deeper coal to the underground, the higher the price. For instance, in locations where fuel is near to the surface, such as in Wyoming, mining expenditures and coal prices are lower in comparison to places (such as Appalachia) where the layer is more in-depth and thinner. In other words, the high cost of fuel taken from underground mines results from the more difficult mining procedures and the need for advanced mining techniques.

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Even though some experts state that coal mining is relatively cheap, other factors must be included in the calculations. Given the thread to Colliers’ lives during the mining procedures and extremely negative impact of emissions produced during the burning coal, the real expenses of extracting and using this type of fuel are far from the numbers indicated above. A report from researchers from the Harvard University reveals that hidden costs associated with mining and using coal in the United States (Epstein et al., 2011). Dr. Paul Epstein (2011), an associate director of the Center for Health and the Global Environment at the Harvard Medical School, in cooperation with his colleagues, estimated the real cost of coal extraction and utilization which equals to $500 billion per year. The estimated number includes impacts on health, economy, and environment. The study examines implicit factors in the coal fields in the United States. One of them is the Appalachian community where expenses to cover the public health burdens reach almost $75 billion each year.

ii) Nuclear Fuel: description and cost of extraction

Nuclear power is energy generated by nuclear reactions such as the fission process of atoms

(World Nuclear Association, 2016). The mineral used for nuclear fission is uranium.

There is no significant difference between uranium mining other types of mining. The exception occurs only when the ore has a high grade (World Nuclear Association, 2016). In the case where the mineral has a very high degree, special mining techniques such as dust suppression are involved in order to reduce the radiation and to ensure the safety of the environment and people living in the neighborhood. In comparison to oil, gas, and coal, the discovery of uranium is less complex since the radiation footprint of uranium’s decay products can be identified and mapped from the air.

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Figure 6: Uranium Price Chart. Source: Cameco. Link: https://www.cameco.com/invest/markets/uranium-price

World Nuclear Association (2016) also identifies that the uranium exploration cycle from 2003

to 2009 approximately $5.8 billions of US Dollar was spent on uranium occurrences’ discovery

and mining in more than 600 projects. During these six years, almost 400 new companies were

created to expand the uranium exploration. About $1.2 billion of US Dollar was allocated to

improve discovery methods and to define known deposits. Such considerable investments in

uranium mining are explained by the significant increase in the uranium price in the market (see

Figure 6). The graph illustrates the Uranium Spot price and Long-Term Uranium Price from the

1990s to 2018: the highest value for both types of market prices was in the June 2007 (Cameco,

2018). However, since 2008 the price decreased significantly. And uranium field-work activity

declined accordingly.

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On the other hand, all nuclear technologies are not entirely safe because atomic plants use isolating plutonium, an extremely toxic material that can also be used in weapons, to maximize the productivity of nuclear cycles. (Cameco, 2018). Therefore, the actual costs of nuclear reactors are not identified yet. Given the risk to health and environment, the real cost of extraction and utilization of fossil fuels is far from what is reported by experts in the field. Such hidden costs are usually ignored and not revealed to the general public since it may affect the investments allocated to mining projects and undermine government’s and oil corporations’ authority.

3.2 Renewable sources

According to statistics, in 2012, 13.2% of total energy supply came from renewables sources. In

2013, the number reached 22% (International Energy Agency, 2018). The increase in using green energy might be explained by disruptive innovations allowing humanity to invent new ways of extracting and the maximum energy potential from the sun, wind, water and other sources. Renewable energy has unlimited sources since ‘suppliers’ are constantly re-established by natural processes. In theory, the energy potential of the sun is huge and can match humanity’s need for the electricity and heating needs for the whole year. Nevertheless, there is an issue of sufficient storage of the green energy. Moreover, some countries have an advantage since their territories are perfectly suitable for wind and solar energy plants. Every region on the Earth has renewable energy resources. However, the availability and cost of using green energy in these regions may vary significantly. i) Solar Energy: description and cost of extraction

Solar energy can be used to produce either electricity or heat.

Findings from the World Energy Council (2016) report indicate that the price for solar power is declining rapidly in the market as the grid parity was achieved in many countries. The solar

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industry is entering the markets of developing countries. The report also states that “policy and regulatory incentives, an oversupply of installation components, and advancements in technology are driving down the reduction in cost” (p. 38). The disruptive innovations such as

Perovskite cells after commercialization most likely will decrease the price even lower due to its easiness to manufacture and cheap production (World Energy Council, 2016). Therefore, the solar energy is on the way to become a serious competitor in the energy market and attract more investors into this segment. The current global trend in the solar industry is that Photovoltaic

System (PV) has become a mainstream technology in recent years: the number of installed solar power capabilities doubled in five year period (see Figure 7). Between 2009 and 2014, prices for PV modules decreased by 85%; the turning-point occurred in 2011 (see Figure 8). In other words, the sharp decrease of solar energy technologies' prices made PVs more accessible, which in turn, attracted more companies and people to install solar power capacity.

Figure 7: Global installed solar power capacity, 2000-2015 (MW). Source: World Energy

Council. Lonk: https://www.worldenergy.org/wp- content/uploads/2017/03/WEResources_Solar_2016.pdf

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Figure 8: Average monthly solar PV module prices by technology and manufacturing. Source:

IRENA Renewable Cost Database. Link: http://www.irena.org/costs/Charts/Solar-photovoltaic

ii) Hydropower: description and cost of extraction

Energy generated from falling water is called hydropower (water power). According to IEA

(2017), water power is the most significant source of renewable electricity in the world and produced around 17% of the total world electricity in 2017. IEA’s forecast states that hydropower will remain the world’s largest source of renewable electricity generation for the next four years, and will play a critical role in switching to low-carbon power systems.

Currently, China is the leader in the world market in hydropower sector (EIA, 2017). China uses hydroelectric power plants to provide electricity and heat and has the most substantial number of plants with high installed electrical capacity in the world (see Figure 9).

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Figure 9: Levelized cost of electricity and weighted averages of small and large hydropower projects by country/region, 2010-2016. Source: IRENA Renewable Cost Database. Link: https://www.irena.org/-

/media/Files/IRENA/Agency/Publication/2018/Jan/IRENA_2017_Power_Costs_2018.pdf

The average levelized cost of electricity (LCOE) from hydropower plants is relatively low: the weighted average LCOE is below $0.10/kW almost in all regions (see Figure 9). However, the investment costs across the areas may vary depending on locations and site conditions. Besides, the high initial investment is compensated by the prolonged economic lifespan (around 100 years) of the hydropower plant and relatively low operation and maintenance costs. (IRENA,

2018). The operation and maintenance costs are low because power generating equipment does not require significant renovation or repairs for a long period of time. To sum up, the electricity generated from hydropower plants is one of the cheapest in the market.

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iii) Wind Energy: description and cost of extraction

Wind power technologies have two primary characteristics: the axis of the turbine and the location. The axis of the turbine can be vertical or horizontal, and the location can be onshore or offshore (IRENA, 2018). The LCOE of a wind project depends mainly on four factors:

• Capacity factor: This factor includes several variables, where most important ones are nature and quality of the wind resource.

• Total installed costs: The primary cost category which drives the total installed costs of a wind project is the turbine cost.

• Weighted Average Cost of Capital (WACC).

• Operations and maintenance costs: This factor consists fixed and variable costs and represents a quarter of LCOE.

According to the International Renewable Energy Agency, known as IRENA (2018), “the global weighted average LCOE declined from USD 0.40/kWh in 1983 to USD 0.06/kWh in 2017, an

85% decline. The data suggests that every time cumulatively installed capacity doubles, the

LCOE of onshore wind drops by 15%.” (p. 89) (see Figure 10).

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Figure 10: The global weighted average levelized cost of electricity of onshore wind, 1983-

2017. Source: IRENA Renewable Cost Database. Link: https://www.irena.org/-

/media/Files/IRENA/Agency/Publication/2018/Jan/IRENA_2017_Power_Costs_2018.pdf iv) Geothermal Energy: description and cost of extraction

Geothermal energy comes from the Earth’s core: in active geothermal areas like Iceland or

Philippines. Geothermal power plants do not require any fuel. Therefore, they are immune to fuel fluctuations. Geothermal plants may significantly differ from each other because the quality of their sources varies (IRENA, 2018).

The total costs for geothermal power plant installation consist of five primary factors (IRENA,

2018):

• exploration and resource assessment costs

• drilling costs for production and re-injection costs

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• field infrastructure, the geothermal fluid collection, and disposal system, and other surface installations;

• costs of the power plant

• project development and grid connection costs

IRENA’ report “Renewable Power Generation costs 2017” states geothermal power total installed costs fit within the range of $2000 to $5000/kW, and can be as low as $560/kW

(IRENA, 2018). The most significant disadvantage of this type of renewable energy is that capital costs are enormous.

3.3 Is nuclear energy green energy?

Although nuclear energy is considered as a non-renewable energy source since uranium is a fossil fuel and its deposit is limited, some experts believe that nuclear power can be classified as green energy. The question “Is nuclear energy green energy?” has become a subject of major debate in recent years. This section provides arguments why and why not nuclear power can be considered as green energy.

i) Arguments for nuclear as renewable energy

The main argument proposed by supporters is that nuclear energy generates significantly low carbon footprint, which is one of the significant characteristics of renewable energy. For instance, nuclear power plants supplied 2518 billion kWh of electricity produced only 73 million tons of carbon dioxide (CO2). While oil would produce 1846 million tonnes of carbon dioxide

(CO2) to generate the same amount of electricity (World Nuclear Association, 2016). Another argument was designed by Bernard L. Cohen, the former professor at the University of

Pittsburgh. Professor Cohen stated that “since energy sources derived from the sun are called

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“renewable,” that adjective apparently means that they will be available in undiminished quantity at present costs for as long as the current relationship between the sun and Earth persists, about 5 billion years” (Cohen, 1983, para. 1). Therefore, if uranium deposit is proved to last as long as the relationship between Sun and Earth, then nuclear energy should be classified as renewable energy. According to Mr. Cohen, water in oceans and seas contains 3.3 parts per billion of uranium, therefore by calculating the total weight of seawater on Earth, he estimated that water in the oceans holds 4.6×109 tonne of uranium, which in turn, can supply the world with electricity for next 7 million years. Professor Cohen also stated that the use of breeder reactors would allow fueling the world with nuclear energy indefinitely. Mr. Cohen’s idea of extracting uranium from the oceans is not visionary anymore. The United States, Japan, and

China are competing to be the first nation to make Cohen’s idea become true. DOE’s Pacific

Northwest and Oak Ridge American national laboratories have already started the project of removing uranium from the seawater (Conca, 2016). ii) Arguments against nuclear as renewable energy

The opponents of classifying nuclear energy as renewable energy state that the toxic atomic waste from nuclear power reactors contradicts the definition of green energy. The nuclear waste is more dangerous than greenhouse emissions due to its high level of radioactivity. Nuclear waste might release toxic element during the decades. Therefore, it cannot be included in the list of renewable energy sources. Such accidents as “Chernobyl” and “Three Mile Island” prove how destructive and terrible can be the consequences of nuclear power plants’ radioactivity. The detailed description of the environmental and socio-economic impacts of the Chernobyl accident is discussed in Chapter VII. iii) Conclusion

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It looks like both sides of the debate cannot decide which exact definition of renewable energy to use – experts interpret green energy and its requirements differently. Moreover, such organizations as IRENA stated that they are not willing to support any programs connected to nuclear power since it is a long and over complicated process which poses a severe threat to the eco-system of the Earth and humanity (Kanter, 2009). Besides, IRENA’s decision has nothing to do whether nuclear power is renewable or not.

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IV. The energy crisis

The most significant disadvantage of the energy market is its vulnerability. Any changes in the energy market considerably affect the global economy, especially the developing countries.

History has proved that today we live in an era of economic uncertainty. The oil market was relatively stable from the 1940s until 1973. Nevertheless, after the 1970s the crude oil prices have experienced considerable fluctuations for several reasons. The energy crisis of 1973 and energy crisis in the 2000s illustrate how fragile the global economy is.

The oil embargo against US imposed by OPEC was the first step into oil market instability.

OPEC canceled crude oil exports to the particular states and reduced significantly the oil production. As a result, the price for crude oil increased significantly. The energy crisis caused an economic recession in the United States and ended the post - World War II economic boom.

It was different from previous recessions since it was a time of : high inflation followed by high unemployment rate and slow (Oil Embargo 1973-1975). As a result, the United States responded to the OPEC actions by implementation of the new energy strategy which was intended to boost American production and reduce its dependence on oil- exporting countries in the Middle East (Oil Embargo 1973-1975). The new energy plan focused on the creation of the fuel storage of the crude oil called “Strategic Petroleum Reserve”.

“Strategic Petroleum Reserve” was intended to be the most abundant emergency petroleum supply in the world (Oil Embargo 1973-1975).

The first reason is Arab oil embargo in 1973 which induced the first significant energy crisis: oil prices increased significantly as Middle East oil exporters cut world supply (2000s Oil Crisis and its Consequences in the EU`s Energy Sector, 2001). The second reason is the Iranian revolution in 1978 which caused the second major shock in the oil market. Lack of oil exports led to the

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significant increase in the oil prices. According to the Figure 12, which represents the crude oil prices over time, the energy market was relatively stable from 1991 until 2003. It falsely led into an illusion of the economic safety ( Bank of St. Louis and US, 2017). The graph also represents that in 2003 the price for a barrel of crude oil was above $33 of US Dollar, reached $75 in 2005, and peaked at $140 at the end of 2008.

Figure 12: The price for crude oil since 1992. Source: FRED.

The article “Effects of ” reports that “the increase in oil price differs internationally according to currency market fluctuations and purchasing power of currencies”

(para 3, 2009). The article explores changes in the energy market in the following countries: the

United States, Taiwan, Japan and Europe occurred in the timeline 2002 - 2008.

In case of the United States, the price for crude oil increased by five times: from $20 to $100.

Regarding the economic situation on East Asia, the national currency of Taiwan gained value over the U.S. dollar. In other words, petroleum in Taiwan became four times more expensive.

Regarding the Japanese market, the Japanese Yen also gained value over U.S. Dollar. So, in

Japan price for oil increased by four times. The Euro as well experienced an increase in currency

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value, so the petroleum in the countries became almost three times more expensive.

On average, the price for crude oil increased by 400% in Taiwan, Japan, Eurozone and the

United States. It is crucial to mention that findings described above do not include changes in relative purchasing power of different currencies. James D. Hamilton, an American econometrician, connected these high prices to numerous factors such as political and economic tensions in the Middle East, steadily increasing demand in China, the devaluation of the national currency on the United States, slowdown in the oil supply and financial speculations (Hamilton,

2009). The energy crisis in 1973 and 2000s show that changes in the oil prices are not caused only by law. Other factors such as speculations in the market contribute to energy market vulnerability.

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V. Economic advantages of switching to renewable energy

According to IRENA (2016), there are four economic benefits of using the green energy: the increase in the global GDP, improved welfare, creation of new jobs and the positive shift patterns of global trade (Ferroukhi et al., 2016). The macroeconomic impacts of renewable energy deployment presented in the IRENA’s study were obtained based on a macroeconometric analysis, using the E3ME tool.

Regarding the first point, IRENA in their research indicates that “doubling the share of renewables in the global energy mix by 2030 will increase global GDP by up to 1.1% or USD

1.3 trillion” (Ferroukhi et al., 2016, p. 9). The authors of the work also state that the primary drivers of such positive impact on global GDP are increased investments in the renewable sector, and the higher rate of electrification of final energy uses.

The second benefit is improvements of welfare. Improvements in quality of life and well-being are estimated higher than gains in GDP since the measurements of economic performance has specific frames and, therefore, is limited. IRENA’s report estimated that the switching to green energy would increase global welfare by 2.7%. Moreover, if doubling share of renewables achieved by higher electrification and heat would boost global welfare by 3.7%.

According to IRENA, the primary indicators of welfare include following factors:

• Economic impacts based on consumption and investment;

• Social impacts based on expenditure on health and education;

• Environmental impacts, measured as carbon dioxide emissions

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The third benefit is about the creation of new job opportunities. The transition to renewable energy sources will increase direct and indirect employment in the labor sector to 24.4 million by 2030 (IRENA, 2016). The most in-demand and fast-growing jobs will be in bioenergy, hydropower and solar technologies. New jobs might help to decrease the high unemployment rate, especially in rural areas.

The final benefit is a positive impact on global trade. Switching to green energy will impact fuel importers and exporters, and new markets will be created. IRENA (2016) states that “trade in renewable energy equipment and other investment goods and services will increase as a result of the scaled-up deployment in power and end-use sectors “ (p.11). However, it will also mean that trade in other types of sources, notably fossil fuels, will decrease significantly. The doubling share of green energy in the global energy market will have an impact on fuel importers and exporters. Regarding fossil fuel importers, the transition will have potentially favorable trade implications with no significant adverse effects on other sectors of the economy and create improved due to greater reliance on local energy sources. In other words, countries which have to continually import oil, gas, and coal from other states will have an opportunity to become more independent regarding market dependency because they will be able to generate their energy. OPEC states will have fewer chances to manipulate the market by artificially increasing and decreasing the prices of oil. Therefore, the efficiency of the market will grow. Currently, OPEC countries own more than 75% of and OPEC’s share of the world oil market is about 41% (Belaunde, 2001). These facts signify how oil market depends on oil-exporting countries in the Middle East. It proves the concern that fossil fuel exporters appear the most vulnerable to changes in trade patterns since fossil fuel is the main contributor to their GDP. The export revenues eventually will significantly affect their economies. Therefore, the early transition to sustainable energy sources in oil exporting countries could be seen as an

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opportunity for economic diversification and help to mitigate the risk of running out of energy resources in the future. Additionally, the new features of energy markets will be created.

Moreover, countries located in the sunny areas or rich with water supplies might become a successful exporter of green energy and offer it to other states which do not have enough space to place solar PVs or do not have sufficient sources of water to build hydropower plants. For example, countries in sub-Saharan region where the majority of population live in rural areas might benefit from generating electricity from solar PVs and increase their GDP by exporting green energy to other countries.

An outstanding accomplishment was achieved by Costa Rica: Central American states uses sustainable energy as the primary source of energy since 2015. Maria Gallucci, the energy and environment reporter at International Business Times (2016) stated that Costa Rica used green energy as primary source of energy in 2016: Central American state ran entirely on sustainable energy for more than 250. In fact, 98.1% of electricity was generated by green energy sources.

Among all types of sustainable energy, Costa Rica heavily relies on large hydropower plants which are fed by numerous rivers and heavy seasonal rains. Geothermal plants and wind turbines are also prominent sources of power, while PVs and biomass provide small but growing share of electricity. Costa Rica seems like an incredibly successful example which proves that even developing countries are able to switch to renewable energy sources. However, the fact that

Costa Rica’s economy is relatively small in comparison to such countries as United States should be taken into consideration. For instance, Costa Rica's population is 65 times smaller than the United States. Therefore, the demand for electricity in North and Central America significantly differs. Regarding the capacity factor, Costa Rica generates 370 times less electricity than the United States does, according to national energy data from both countries ().

In other words, the United States requires more effort in order to “green” the electric grid.

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Approximately 45.7% of the live in rural areas, and one third of them do not have access to electricity (, 2014). In other words, 1/7th of the world population cannot enjoy a simple modern feature - electricity. Sustainable energy might become an effective source of jobs and rural growth in most countries. In the article “Linking Renewable

Energy to Rural Development” (2012), OECD, an Organization for Economic Cooperation and

Development, made a report of case studies to examine the possible impact of renewable energy on regional economies, focusing on rural communities. Organization for Economic

Cooperation and Development explored the link between sustainable energy and rural development in terms of job creation, economic development, infrastructure and human capital in 16 remote areas in ten OECD countries. The report identified several benefits for rural communities if they switch to sustainable energy sources.

The first benefit is the fact that energy will be more affordable: providing electricity generated by fossil fuels to isolated rural areas is an expensive and complex process which requires constant repairs. However, if people in remote regions produce their own energy by using PVs, wind turbines, biomass and other green energy sources, they will be less dependent on government aid and electricity and heat will become for accessible and affordable for them.

Such opportunity to generate independent and cheap energy can trigger economic development especially in Less Developed Countries (LDCs). In simple words, countries which struggle to import oil, gas and coal due to energy market instability and high prices, will be able finally increase quality of life and improve infrastructure.

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Another benefit is reduction of so-called “fuel poverty” by allowing remote regions to produce their own energy rather than importing expensive fossil fuels. The OECD Research (2016) provides several examples. One of them is the case of the Shetland Isles of Scotland, where more than 30% of population live in fuel poverty. The term “fuel poverty” means that people spend on average more than one-tenth of income to heat their houses. In the case of Shetland, more than 13% of local population spend on average one-fifth of their income on heating. By providing electric grid from sustainable energy systems. The issue can be solved.

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VI. Economic disadvantages of switching to renewable energy

One of the biggest disadvantages with sustainable energy is that it is difficult to generate the same amount of electricity produced by fossil fuels. In order to resolve this issue humankind would either reduce the consumption of energy or develop and build more green energy facilities which in turn require constant investments. The second option seems more realistic as technology sector is continuously developing.

Another issue is that some green alternatives of fossil fuels are not that clean as people may think of. For example, hydroelectricity, which is considered as a green and clean source of power by many countries, produce some toxic gas emissions. Hydropower plant is a significant source of greenhouse gas emissions: hydroelectric dams produce methane emissions (Weiser,

2016). The study conducted by the Washington State University found out that methane is 35 times more toxic than another types of greenhouse emission such as carbon dioxide (Wisser,

2016). Moreover, the study highlights that methane makes up almost 80% of the emissions from water storage reservoirs created by hydropower dams. Scientists should direct their attention to this issue and explore how it is possible to reduce methane exposure on dams and make hydropower plants a real source of green energy.

Another disadvantage is strong correlation between production of energy from sustainable energy sources and weather. As it was described in the Chapter 3, such alternatives of fossil fuels as wind turbines, solar collectors and hydro-generators heavily depend on weather conditions. If cataclysms such as earthquakes, volcanic eruption, floods, hurricanes and tsunamis occur, the capacity to generate electricity and heat decreases significantly. Even minor changes in weather might affect the productivity of green alternatives as in the long run it might become unpredictable and inconsistent.

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Approximately 75% of the world's oil reserves are controlled by the OPEC states, and OPEC’s share of the world oil market is about 41% (Belaunde, 2001). Therefore, oil-exporting countries most likely will not support the transition to green energy as they will lose the significant portion of the state’s GDP. OPEC will be strongly resistant to accept such huge changes in the energy market since their primary source of income would be in jeopardy. This, in turn, might create political instability in the world, as oil-exporting countries would artificially create obstacles in the market and threaten the world to start another warfare.

In addition, even though the smooth transition to green energy would be successful, the issues related to efficient energy storage still exists. Current technologies are unable to keep the energy potential for a long period of time. For example, in order to supply the urban city with electricity generated from green PVs and wind turbines, it is necessary to efficiently store and transfer energy from the places where it is collected. There might be no enough space in big cities to place huge solar PVs or wind turbines. Therefore, the system of storage and transferring green energy should be developed and implemented in the most efficient way for the purpose of smooth switching to renewable energy sources.

Even though sustainable energy can boost the economic growth in most counties, it also requires a complex and flexible policy framework and a long-term energy strategy. In other words, governments would need to carefully design and implement new economic policies to avoid the excessive expenses of using green energy. The changes in energy market most likely will cause

World Trade Organisation to reconsider its policies and laws regarding the fossil fuels as there would be new powerful players in the market. Research and Development disarmament should focus on improving the efficiency and productivity of fossil fuel alternatives and find the way

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how to attract more investors by increasing the benefits of switching to sustainable energy sources.

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VII. The real cost of pollution

Pollution produced by fossil fuels create a serious threat to the Earth’s environment, as well as to humanity. One of the economic aspects of transition to sustainable energy are examining the implicit and explicit costs of pollution. In order to identify the approximate costs, it is crucial to define the types of pollution and its consequences in the long term. The paper focuses on two types of pollution: air pollution and radioactive pollution as they are the most dangerous ones.

7.1 The air pollution.

Air pollution is considered as one of the deadliest form of pollution as it spreads freely in the air and easily enters the human body. According to the World Bank (2016), on average 5.5 millions of people died due to diseases caused by air pollution each year. A study conducted by the World

Bank in cooperation of the Institute for Health Metrics and Evaluation (IHME) estimated that those deaths cost the global economy around US $225 billion in lost labour income. Air pollution- related deaths strike mainly children and the old people, premature deaths also result in lost potential labour income for working-age men and women. Moreover, The World Bank states that 90% of the population in Less Developed Countries are exposed to highly dangerous levels of air pollution. That is why in 2916 the World Bank committed US $1 billion to help China.

Which is one of the most polluted states in the world, to reduce the greenhouse emissions and improve the quality of air (World Bank, 2016). Another source indicates that air pollution produced by fossil fuels in the United States caused damages which are equivalent to US $131 billion in 2011 alone (Harvey, 2016). To sum up, the air pollution is becoming a serious threat to human well-being and might cause a significant impact on the global economy.

7.2. The nuclear waste and radioactive pollution.

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There is another type of pollution - nuclear pollution. Even though nuclear power plants do not directly produce the greenhouse emissions while operating, it still produces radioactive wastes such as uranium mill tailings (EIA, 2017). The radioactive waste remains harmful and dangerous for all alive organisms for several thousands of years. In order to mitigate the risks of radioactive exposure from the nuclear power plants, governments should implement special regulation to ensure people’s safety. Those regulations govern radioactive wastes’ handling, transportation, storage and safety measures on atomic power plants. According to the National

Audit Office report (2012), the issues associated with “nuclear legacy’ costed around US $2.5 billion in the 2012/2013 budget in the United States. It also means that the real cost of nuclear energy is much higher than it is reported as organisations, for example IRENA, do not include such hidden costs as the cost of nuclear waste.

The nuclear clean-up costs in Germany is also huge. According to Clean Energy Wire report

(2015), the environment ministry estimated that the costs for nuclear decommissioning and storage to be covered by the state and/or utilities amount to 65 billion euros (see Figure 11). The detailed breakdown of costs is represented on the Figure 11.

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Figure 11: The costs of decommissioning, interim storage and transport of NPP waste and utilities. Source: Clean Energy Wire. Link: https://www.cleanenergywire.org/factsheets/nuclear- clean-costs

The example of the toxicity and danger of the nuclear waste are Chernobyl catastrophe which occurred in the modern territory of Ukraine. The Chernobyl accident led to cascade of events and disputes of what are the real impacts on environment and people’s health. According to

International Atomic Energy Agency (2005), the radioactive cloud exposed from the burning reactor spread various types of radioactive materials over the Europe, especially the Eastern part.

The most toxic radioactive material released during the accident is radioiodine and caesium radionuclides which causes thyroid cancer and genetic mutations. The study notes that caesium-

137 still can be found in the soil and food in many parts of Europe after 30 years of the disaster.

Moreover, since the radioactive elements are rapidly absorbed by dairy animals, it led to significant thyroid doses among people, especially children who consumes dairy products the most. The high levels of radioiodine in milk were observed across the Europe. In other words,

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the impact of exposed radioactive elements on Earth’s eco-system is incredibly devastating since it might take several decades or even the whole century to get rid of nuclear waste and infiltrates the animals, plans, soil and water. Regarding the socio-economic impact of the Chernobyl incident, International Atomic Energy Agency (2005) stated that government policies implemented to cope with the negative consequences of the nuclear disaster imposed huge cost on the former Soviet Union. Since the radioactive cloud was spread to the Europe, Scandinavian countries were also subject to economic losses. Belarus, the Post-Soviet state, estimated the losses over 30 years at $235 billions of US Dollar (International Atomic Energy Agency, 2005).

The report also states that Ukraine still devotes around 7% of its government spending each year on Chernobyl-related programs. The large numbers can be explained by the fact the costs include not only direct damage caused by the accident but also expenditures related to evacuation of people, providing social protection to the population, indirect losses related to the opportunity costs of ‘cleaning’ the agricultural land and forests and opportunity costs of losing the main source of energy – Chernobyl power plant.

Fukushima Daiichi nuclear disaster caused by the earthquake and tsunami on 11 March 2011 is considered as the most terrible nuclear incident after Chernobyl catastrophe (Green,

2016). Japanese Ministry of Economy estimated the cost to around ¥21.5 trillion which is equivalent to $187 of US Dollar (Green, 2016). The cost includes expenses of decommissioning the nuclear power plant and compensation to the victims of the disaster. According to the article

“The economic impacts of Fukushima disaster”, the current estimate is four times larger than estimates in 2012. Such a huge difference might be explained by the fact that the process of removal of radioactive fragments turned out to be more complicated as it was anticipated. In addition, the Japanese government announced that there is high possibility that annual expenditures of countermeasures would increase from $690 million of US Dollar to several

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billions (Green, 2016). The expenses described above cover only direct damage of the nuclear catastrophe. The real cost of Fukushima Daiichi disaster has myriads of indirect aspect where the largest one is finding and using alternative sources of energy. As a result, Japan increased the share of renewables and imported more fossil fuels to compensate the loss of the Fukushima nuclear plant which was one of the main sources of energy. For example, fossil fuel import associated costs amounted to $31.3 billion of US Dollar in 2013 (Green, 2016). If we calculate expenses of using fossil fuels for the period 2013-2018, we will get $156.5 billions of US Dollar

(31.3 billion x 5 years.). Adding this indirect cost to the estimate of $187 billions of US Dollar, the approximate costs of Fukushima nuclear gives the total of $343.5 billion or more, since this calculation does not include other indirect costs. Regarding the macroeconomic impacts, the price for electricity rose on average by 20% across the Japan. This fact created economic obstacles for companies in energy industry, put pressure on medium and small-sized enterprises and manufacturing companies since the cost of production increases along with the cost of the electricity.

Examples of Chernobyl incident and Fukushima nuclear disaster proves that the consequences of radioactive pollution affect the whole eco-system and modern technologies cannot fully prevent the spread of toxicity. It means that the cost of environmental protection from the nuclear waste cannot be economically estimated since the affected areas are difficult to identify. In addition, the real impact of the Chernobyl accident most likely is different from what it states in the report since the Soviet Union did not fully reveal the details of the catastrophe in order not to damage its public image among citizens of the Soviet Union and Western States. The example of

Chernobyl catastrophe raises the question whether nuclear power plants are safe options to generate energy and is the risk worth the outcome.

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7.3. The overall cost of pollution

Various types of pollution contribute to global warming, which in turn, threatens people’s existence on the Earth. Therefore, the cost of countermeasures against the global warming should be also considered as a one of the key factors. Ric Colacito (2016), an associate professor of finance and economics at the University of North Carolina, estimated that the cost of climate change will possibly be as large as one-third of the United States’ GDP in the next 100 years.

Professor Colacito also states that the sector will suffer the most as it significantly depends on weather conditions. In other words, it is crucial to mention that the cost of inaction will be much higher than actions taken to mitigate the risk of climate change and prevent global warming and other negative consequences of pollution caused by non-renewable energy sources.

Nevertheless, the real cost of pollution cannot be identified correctly since it has impact on every single unit of life on the Earth and there are myriads factors of different types of pollution which are almost impossible to identify with humanity's current knowledge and technologies.

Therefore, the cost analysis of the negative consequences of pollution is impossible to calculate.

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VIII. Conclusion and recommendations

Humanity will eventually switch to renewables because the deposits of fossil fuels are finite.

Therefore, the question is not whether people will shift to sustainable energy but how and when.

Even though future technologies would allow extending the lifetime of conventional sources of energy, the need eliminate the damaging effects of greenhouse emissions does not disappear. In fact, it is a more severe and immediate issue than fossil fuel depletion. The transition to sustainable energy sources is a complex process as it will lead to significant changes not only in the energy market but also in the global economy. The generation of electricity and heat from renewable power sources most likely will create new market leaders in the future. The new sectors of the market will emerge, and the global picture of the world economy will ultimately differ from today’s view as green energy gives myriads of unique opportunities to use new courses of states’ income, to be more independent as developing countries will have more access to the energy market. Moreover, given that the costs of extracting and using sustainable energy are less than fossil fuels’ utilization and mining, it will be economically beneficial for most countries to switch to renewable energy. Given the example of energy crisis in 1973 and 2000s, the transition to green energy will bring a to the global economy and make the world market more efficient since there will be less opportunities to artificially decrease or increase the prices or manipulate other countries by cutting the supply of fossil fuels.

In addition, the opportunity to increase access to electricity, especially in rural areas, will help

Less Developed Countries to significantly increase the quality of life, welfare, and infrastructure in the long run. However, a positive connection between rural economic development and local economic growth requires well-designed policies, regulations, and strategies. Therefore, such organizations as United Nations and World Trade Organisation should focus more on guiding and helping developing countries to combat the fuel poverty and achieve economic prosperity.

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Moreover, these non-profit organizations must mitigate the risk that other countries might try to prevent such achievements as the new prosperous states can become serious competitors on the global economic stage.

In order to achieve a successful transition to sustainable energy, the policymakers should improve and efficiently introduce new regulations which will maximize the economic benefits of the transition for their national economies. Since the process of the switching to green energy is complicated, the policies will also require complex structure. Some countries might follow the example of the European Union’s 2020 environmental policy for two reasons. The first one is that the policy was designed for 28 states and took into account the differences between the size of each country and put target according to states’ economic capabilities. In other words, countries with different economic conditions might achieve outstanding results if they carefully examine the European Union’s environmental targets and its legal implementation. The second reason is that the EU’s policy has overreached one of the three key targets and can be named as one of the most successful environment-related policy. Another example that other states might consider as ‘role model’ is Costa Rica’s incredible achievement. Costa Rica proves that even developing countries are able to generate electricity entirely from the renewable energy sources if they wisely use their geographical characteristics. For example, the sub-Saharan region in

Africa can use excessive sun exposure to produce energy by PVs and resolve the issue providing electricity to the remote regions.

The paper examined the economic advantages and disadvantages of the transition to sustainable energy sources, and the conclusion is that the economic benefits of the green energy will outweigh the negative economic aspects of the transition only if states adequately analyze their economic potential and weaknesses and implement efficient environment policies and

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regulations. Moreover, in the end, oil-importing countries will be less dependent on oil exporting countries. In the world where renewable power is the primary source energy, the risk of the energy crisis is minimal. Therefore, the global economy will be more efficient and sustainable.

Moreover, it is crucial to understand that the smooth and successful transition to green energy would take several decades since today world is not ready for such considerable changes in the energy market.

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