TAX THE EXTERNALITIES:

"The price of energy does not match its cost," said Benjamin Sovacool, a professor of energy policy at the University of Sussex in the United Kingdom. It's well known that energy prices don't capture all "externalities" -- or side effects of energy use, like the health costs associated with pollution from a coal-fired power plant. The burgeoning crisis of energy supply and cost in the wake of the Ukraine invasion could be considered a sort of externality -- one that, if weighed realistically, might shift the balance in favor of more climate-friendly decisions.

The European Union gets about 40 percent of its natural gas and a quarter of its crude oil from Russia. Last week, though, the European Commission put forth a plan to cut that reliance steeply by the end of this year. Germany canceled the long-anticipated Nord Stream 2 pipeline, which cost $11 billion and would have carried yet more natural gas from Russia. In the U.S., the Biden administration announced an outright ban on the import of Russian oil and gas, with bipartisan support.

The result of all this is a price shock. The price of a barrel of oil soared above $130 before dropping slightly last week. Natural gas in Europe hit an all-time high on March 7. A gallon of gasoline in the U.S. also hit an all-time high (though below previous records when adjusted for inflation) at well over $4. In short, the world is now starting to pay through the nose for the energy that was, supposedly, the cheaper option.

"What we need is for governments to open their eyes and bury once and for all the narrative of cheap fossil fuels," said Michael Taylor, a senior analyst at the International Renewable Energy Agency. "When you take into account the direct costs, subsidies, climate damages and health costs, fossil fuels are not cheap by any stretch of the imagination, and policy should reflect that."

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