Hidden Gems

Highlighting divergence in cost/benefit analyses

Oftentimes, the issues that grab energy headlines are an extension of deeper underlying divisions.

Take Keystone XL pipeline, which was a major news issue this week due to Trump’s go-ahead. The official position is that it’s good for the economy. There are doubts about whether it even makes financial sense. And there are some who claim the environmental costs are too high.

These sort of divisions are endemic in energy politics, particularly when it comes to the fossil / non-fossil fuel divide. A group will say X has more costs than benefits whilst another group will say that the same X has more benefits than costs. Implied in this way of thinking is the idea that there is one cost/benefit analysis that is correct whilst all others are just wrong.

But is this the real case?

Take, for example, these two recent articles from the CATO Institute and the World Resources Institute (WRI) about carbon, fossil fuels, and renewables.

Both are good reads. I definitely recommend you to read them through before carrying on. Regardless, in very general terms, the articles can be seen as contrasting criticism. It would be hard to support renewables if you circumscribe solely and exclusively to the financial arguments given by Tupy. At the same time, it would be virtually impossible to think of fossil fuels as viable if we work upon the arguments given by Kaufman.

For this point onwards, one can take one of two views.

The first is to react by considering one of the views to be blatantly wrong. One could say that Tupy is wrong because he is doing his analysis on the basis of very limited financial considerations. One could also say that Kaufman is wrong because he is misinterpreting the law or miscalculating the cost of carbon. Myriad other and more nuanced arguments would fall in between these two general logics.

The second is to be slightly more humble and remember that both analysts are, no doubt, extremely smart and well-informed. If you really think one of these views is ‘just dumb’ chances are that you are the dumb one. The idea that either author is making a mistake in their rational analysis, at least one of such magnitude that would make it obscenely wrong, is highly unlikely. Particularly when you can find dissenting analyses of the sort, written by similarly highly-intellectual authors, on a weekly basis.

But how can there be such a massive difference in the positions taken by two analysts of this stature if we avoid the hubris-driven temptation to consider either as basically an idiot?


I honestly don’t know. Maybe, and only maybe, they are simply doing a superbly good analysis of a substantially different future. Or, in other words, maybe, and only maybe, they are thinking about a future. Not the future, but a future.

But that would make this a conversation more about politics, ethics, or aesthetics rather than directly about the accuracy of their cost/benefit calculations. We would need to start this conversation by asking ourselves the question of ‘what future do we want’? But, because this is a question that comes prior to the question of ‘how much of that future can we achieve’, we cannot, however, answer it through a cost/benefit analysis.

Or can we?

Difficult question! Gladly, the point of this small weekly articles is not to give answers but to make them. So… You tell me!

Image credits:
Trans Canada Keystone Oil Pipeline. 
By ShannonPatrick17. CC BY 2.0.