Last week world leaders at the U.N. began a yearlong conversation about global goals for the next 15 years. Many will rightly talk about poverty, food, water and the environment. Few will mention energy. Yet we should.
The use of wood and coal in steam engines kicked off the Industrial Revolution, which led to today's prosperous, modern societies. Reliable and affordable energy is just as vital for today's developing and emerging economies. Driven mostly by its fivefold increase in coal use, China's economy has grown eighteenfold over the past 30 years while lifting 680 million people out of poverty.
The energy ladder is a way of visualizing stages of development. This starts with what we call traditional biofuels: firewood, dung and crop waste. Almost 3 billion people use these for cooking and heating indoors, which is so polluting that the World Health Organization estimates they kill 1 in every 13 people on the planet.
The next step on the ladder is transition fuels, such as kerosene, charcoal and liquefied petroleum gas. The top rung of the ladder is electricity, which thankfully makes no pollution inside your home. Because the electricity is often powered by fossil fuels, it does contribute to the problem of global warming. Hence an alluring option could be to move to clean energy like wind, solar and hydro. Some are suggesting that developing countries should skip the fossil step and move right to clean energy. However, rich countries are already finding the move away from coal and oil to be a difficult one, and there are no easy answers for developing economies.
Today's crucial question is: What should the world prioritize? Fifteen years ago, the world agreed upon the U.N.'s Millennium Development Goals, an ambitious set of targets to tackle poverty, hunger, health and education. Those targets have directed lots of international aid and mostly led to a better world, although much still remains to be done.
For the future, some argue that we should continue pursuing the few, sharp targets from before, since we have clearly not fixed either poverty or health. Others point out that issues like the environment and social justice also need attention. My think tank, the Copenhagen Consensus, is helping bring better information to this discussion. We have asked some of the world's top economists to make analyses within all major challenge areas, estimating the economic, social and environmental costs and benefits of different targets.
So, about the almost 3 billion people cooking with dirty open fires? Should they take higher priority than the broader, long-term objective of cutting back on fossil-fuel use? It turns out there are smart ways to help on both accounts, say Isabel Galiana and Amy Sopinka, the two economists who wrote the main paper on energy.
Burning firewood and dung on open indoor fires is inefficient and causes horrendous air pollution. More than 4 million people die each year from respiratory illness because of smoke from indoor open fires. Most of them are women and young children. Women and children are also the ones who have to spend their time fetching firewood, often from quite far away. Providing cleaner cooking facilities – efficient stoves that run on liquefied gas – would improve health, increase productivity, allow women to spend time earning money and free up children to go to school.
The economic benefits of getting everyone off dung and wood are as high as the human-welfare ones: more than $500 billion each year. Costs would be much lower. Including grants and subsidies to purchase stoves, annual costs would run about $60 billion. Every dollar spent would buy almost $9 of benefits, which is a very good way to help.
The economists also provide a more realistic target, which turns out to be even more efficient. Since it is awfully hard to get to 100%, they suggest providing modern cooking fuels to 30%. This will still help 780 million people but at the much lower cost of $11 billion annually. For every dollar spent, we would do more than $14 worth of good.
While clean cooking is important, electricity can bring different benefits. Lighting means that students can study after dark and family activities can continue into the evening. Clinics can refrigerate vaccines and other medicines. Water can be pumped from wells so that women do not have to walk miles to fetch it.
The value of getting electricity to everyone is about $380 billion annually. The cost is more difficult to work out. To provide electricity to everyone, we would need the equivalent of 250 more power stations, but many rural areas might best be served by solar panels and batteries. This is not an ideal solution, but it would still be enough to make an enormous improvement in people's lives. The overall cost is probably around $75 billion per year. That still does $5 of benefits for each dollar spent.
If we want to tackle global warming, on the other hand, there are some targets we should be wary of, whereas others are phenomenal. One prominent target suggests doubling the world's share of renewables, particularly solar and wind, but this turns out to be a rather ineffective use of resources. The extra costs of coping with the intermittent and unpredictable output of renewables makes them expensive, and the cost is likely to be higher than the benefits.
But the world spends $544 billion in fossil-fuel subsidies, almost exclusively in developing countries. This drains public budgets from being able to provide health and education while encouraging higher CO₂ emissions. Moreover, gasoline subsidies mostly help rich people, because they are the ones who can afford a car. To phase out fossil-fuel subsidies would be a phenomenal target because it would cut CO₂ while saving money for other and better public uses. The economists estimate that every dollar in costs would do more than $15 of climate and public good.
With such high-return targets, the economic evidence shows that if carefully chosen, energy targets should definitely be part of the world's promises for the next 15 years.
Bjorn Lomborg is president of the Copenhagen Consensus Center, a think tank ranking the smartest solutions to the world's biggest problems by cost-benefit.