For years, people thought fossil fuels were the budget-friendly choice – cheap petrol or an affordable energy bill felt like a win for their wallets. But this is so wrong. In 2015, the International Monetary Fund calculated the “true cost” of fossil fuels at $5.3 trillion for that year (about $10 million every minute).
Let that sink in. What seems cheap upfront costs us all dearly through climate disasters, hospital bills, and economic risks that don’t appear on our monthly statements.
This article will examine the hidden expenses behind coal, oil, and gas and compare them with clean alternatives. From environmental damage and public health emergencies to the bright economic prospects of renewables like green hydrogen, we'll explore which energy sources are more cost-effective in the long run.
Prepare to challenge everything you thought you knew about “cheap” energy.
The true cost of fossil fuels
- Hidden expenses: Fossil fuels appear inexpensive because many actual costs are hidden. The price of petrol or electricity doesn’t account for pollution, climate damage, or other fallout.
- Massive subsidies: Governments worldwide heavily subsidise coal, oil and gas, keeping consumer prices artificially low. Taxpayers often foot the bill, masking the actual market price of fossil energy.
- Externalised costs: Environmental and social damages (oil spills, air pollution, climate change) are treated as someone else’s problem. These externalities – costs not borne by fossil fuel companies – are paid by society in other ways.
- Pay now or pay later: You might save a few pence at the pump, but those “savings” come back around. We ultimately pay the price through higher healthcare spending, disaster relief funds for climate events, and economic losses from crop failures or infrastructure damage. In essence, fossil fuels indirectly send us the bill.
Environmental impacts and externalities
- Climate change price tag: Burning fossil fuels releases billions of tonnes of CO₂, driving global warming. The resulting extreme weather (storms, wildfires, floods) causes billions in damage annually – costs not included in fossil fuel prices. According to the IMF, subsidies for oil, coal and natural gas cost the equivalent of 7.1 per cent of global gross domestic product. That’s more than governments spend annually on education (4.3 per cent of global income) and about two-thirds of what they spend on healthcare (10.9 per cent). (imf.org)
- Pollution and ecosystems: Coal mining, oil drilling, and gas fracking all damage ecosystems. Oil spills devastate oceans and coasts, mining scars landscapes, and drilling can contaminate water supplies. Cleaning up these messes (often paid for with public funds) is a hefty added cost to the fossil fuel era.
- Air and water quality: Fossil fuel combustion releases sulphur dioxide, nitrogen oxides, mercury and other toxins. The result? Acid rain harms forests, contaminates rivers, and creates smog that browns our skies. These environmental externalities hit the agriculture and fishing industries, costing millions in lost yields and conservation efforts.
- The carbon cost: Each tonne of carbon emitted has a “social cost” – a monetary value for the future climate damage it will cause. If polluters had to pay this price (through carbon taxes or permits), fossil fuel energy would lose any price advantage. Today, those carbon costs are primarily unpaid, effectively a subsidy that encourages more pollution.
Public health consequences
- Air pollution deaths: Burning fossil fuels fills the air with fine particles and toxic gases. This “dirty” air causes asthma, heart disease and even cancer. Millions die prematurely each year due to fossil fuel air pollution (about 8.7 million deaths globally in 2018 alone – roughly one in five of all deaths) (theguardian.com)
- Health costs: Treating pollution-related illnesses (like lung disease or stroke) is hugely expensive. In 2018, global air pollution from fossil fuels racked up an estimated $2.9 trillion in health and economic costs.
- climateandhealthalliance.org – about 3.3% of the world’s GDP due to hospital admissions, lost work days and reduced productivity.
- Disease and illness: Communities near refineries or coal plants suffer higher rates of respiratory problems, heart conditions and developmental issues in children. Fossil fuel pollution is linked to strokes, lung cancer and other chronic illnesses, which means more doctor visits and medicines – an often overlooked cost of “cheap” coal and oil.
- Healthcare burden: Public health systems bear the brunt of fossil fuels’ fallout. Tax-funded services (like the NHS in Britain) spend billions treating diseases caused by coal smoke or vehicle exhaust. We all pay these indirect energy costs through healthcare budgets rather than at the petrol station.
The economic case for renewables
- Plummeting costs: The price of renewable technology has plunged. Solar power costs have fallen nearly 90% in the last decade, and wind power around 70% ourworldindata.org .
- Clean energy is far cheaper than it was ten years ago, rapidly undercutting fossil fuels.
- Cheapest energy option: Building new wind or solar farms is now more affordable than running existing coal or gas plants in many areas. About four-fifths of new renewable projects built worldwide last year produce power more cheaply than fossil-fuel plants – a stunning flip of the script on energy costs. (.jeffmcmahon.contrarymagazine.com)
- No fuel needed: Renewables harness free resources – sun, wind, water – so they aren’t subject to fuel price volatility. Once you install a solar panel or wind turbine doesn’t need costly coal or gas to keep running. This means more stable energy prices for consumers and insulation from oil and gas price spikes that have previously hurt households.
- Job creation and growth: Investing in renewables creates jobs and boosts economies. From solar installers to wind turbine engineers, the clean energy sector is a significant growth area (often creating more jobs per unit of energy than fossil fuels). These industries can revitalise communities, all while avoiding the hidden costs that come with fossil fuel dependency.
- Avoided future costs: Every solar panel or wind farm we build now reduces emissions and saves us money. By preventing pollution and climate change, renewables help avoid future costs like flood defences, drought relief or health epidemics. They also sidestep potential carbon taxes or penalties, making them a safer long-term bet for companies and governments.
Why green hydrogen is a game-changer
- Clean fuel, many uses: Green hydrogen is produced by splitting water using renewable electricity, yielding a fuel that emits only water vapour when burned. It can replace fossil fuels in sectors like steel production, fertiliser manufacturing, and heavy transport (buses, lorries, ships) that are hard to electrify with batteries alone.
- Energy storage solution: Hydrogen can store excess energy from wind and solar. When there’s surplus solar power on a sunny day, we can use it to produce hydrogen and then use that hydrogen to generate electricity when the sun isn’t shining. This ability to bank renewable energy for later use makes green hydrogen a critical tool for a reliable, 24/7, clean energy system.
- Falling costs and scaling up: Green hydrogen technology is still emerging, but its costs are coming down fast. Governments and innovators are investing heavily, and economies of scale are kicking in. Initiatives are underway to cut the cost of green hydrogen to roughly $1 per kilogram within the next decade, making it competitive with natural gas and other fossil fuels in many applications. (energy.gov)
- Replacing fossil fuels: Hydrogen can do many jobs that coal, oil, and gas currently do without the carbon footprint. For example, it can be used in fuel cells to power cars and trucks (as some city buses already do) or burned in industrial furnaces to provide high heat for making cement and glass. As production ramps up, green hydrogen could sharply reduce our reliance on fossil fuels, especially in areas that have been tough to decarbonise.
- Investment and innovation: Around the world, there’s a green hydrogen boom. Countries like the UK, Germany, Australia, and Japan (among others) have national hydrogen strategies and are pouring funds into R&D and infrastructure. This momentum suggests that hydrogen could be a game-changer – revolutionising energy markets and driving the next great leap in the affordability of renewable energy.
Debunking the “cheap energy” myth
- The illusion of cheapness: The claim that fossil fuels are the cheapest option is an illusion once you count their external costs. They’ve only seemed cheap because we’ve ignored the hefty price tag of the environmental destruction and health crises they cause.
- Subsidies distort the market: Decades of subsidies mean fossil fuel prices don’t follow standard market rules. If coal and oil companies had to pay for their pollution and carbon emissions (the “polluter pays” principle), fossil energy would be far more expensive than it looks today. In contrast, renewables would be even more competitive if all forms of energy were on a level playing field without hidden support.
- Outdated perceptions: The myth persists partly because renewable technologies used to be more expensive. A decade or two ago, solar panels and wind turbines cost a premium—but not anymore. Those costs have plummeted, and clean energy is now mainstream and affordable. Clinging to the old idea that “green energy is too costly” ignores the current reality and technological improvements.
- Price volatility: Fossil fuel “affordability” can vanish overnight with a price spike or supply crisis. We’ve seen it happen – sudden oil embargoes or gas shortages sending prices soaring. Renewable energy, by contrast, isn’t subject to geopolitics or depleted reserves – no one can monopolise the sun or charge monopoly prices for the wind. Over time, a diversified renewable energy mix can provide more stable and predictable energy costs for everyone.
- Whole-system benefits: When we compare energy options, we have to look at the whole system. Sure, a unit of fossil energy might seem cheap, but adding the healthcare burden, environmental clean-up, and climate adaptation costs makes it a losing bargain. Studies increasingly show that switching to renewables saves society money overall (sometimes trillions in the long run), busting the myth that we can’t afford clean energy – in truth, we can’t afford to switch.
Future outlook and sustainable investments
- Renewables on the rise: The transition to clean energy is well underway. We install record-breaking numbers of solar panels and wind turbines globally each year. Renewable energy is expected to dominate new power capacity additions moving forward, and as technology improves, it will only get cheaper and more efficient. The momentum is clear: the future of energy is renewable.
- Fossil fuels in decline: At the same time, the writing is on the wall for fossil fuels. Many coal plants are shutting down or running at a loss, and oil and gas companies face uncertain demand as electric vehicles and alternative technologies take off. There’s a real risk of stranded assets – fossil fuel infrastructure that becomes obsolete – for those who continue pouring money into new coal mines or oil fields. Simply put, betting on fossil fuels is becoming an economically risky choice.
- Investment shifting to green: Investors large and small are pivoting toward sustainable energy. Globally, investment in renewable power and energy-smart technologies now outpaces that in fossil fuel projects. Banks and pension funds are divesting from coal and oil, while billions are flowing into wind farms, solar arrays, battery storage and green hydrogen projects. This shift in capital means more innovation and economies of scale, driving costs down further and creating a positive feedback loop for renewables.
- Policy and international action: Governments worldwide are setting targets for net-zero emissions and backing them up with policy. From carbon pricing to banning petrol/diesel cars in the coming decades, these actions will make polluting fuels more expensive to use and clean energy even more attractive. International agreements and climate finance also direct funds toward clean infrastructure, signalling that sustainable investments will be rewarded in the long term.
- A sustainable future pays off: In the big picture, building a green economy is the most cost-effective path forward. It creates new jobs, avoids the worst financial impacts of climate change, and yields social benefits like cleaner air and water. By rethinking our definition of “cheap” to include long-term and indirect costs, it’s evident that sustainable investments offer the best return. The cheapest energy, in truth, will be the kind that doesn’t incur a massive debt of environmental and health costs.
Conclusion
In summary, the notion that fossil fuels are the “cheapest” energy source crumbles when we factor in their actual costs. The environmental devastation, public health emergencies, and economic pitfalls linked to coal, oil, and gas mean we’ve been footing a far larger bill than the one on our energy invoices. Meanwhile, renewables – from solar and wind to cutting-edge solutions like green hydrogen – are proving to be cleaner and often more cost-effective when considering the whole picture.
It’s time to retire the myth of cheap fossil fuels once and for all. When we count everything that truly matters, the smart money is sustainable energy.
By shifting our investments and policies toward renewables and demanding that energy prices reflect actual costs, we can save money in the long run and build a healthier, more stable world. The next time someone asks if fossil fuels are cheaper, you’ll know how to answer – and hopefully, we’ll all act accordingly to secure a greener future.
To learn more about how Hydrogenera is pioneering the green hydrogen revolution, visit our website for detailed insights into our innovative solutions for a cleaner, more sustainable future.