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Environmentalists support a major phase-down of fossil fuels (with the near-term excep-tion of natural gas) and substitution of favored“nonpolluting” energies to conserve depletableresources and protect the environment. Yet ener-gy megatrends contradict those concerns. Fossil-fuel resources are becoming more abundant, notscarcer, and promise to continue expanding astechnology improves, world markets liberalize,and investment capital expands. The conversionof fossil fuels to energy is becoming increasinglyefficient and environmentally sustainable inmarket settings around the world. Fossil fuelsare poised to
increase
their market share if envi-ronmentalists succeed in politically constraininghydropower and nuclear power.Artificial reliance on unconventional energiesis problematic outside niche applications.Politically favored renewable energies for gener-ating electricity are expensive and supply con-strained and introduce their own environmentalissues. Alternative vehicular technologies are, atbest, decades away from mass commercializa-tion. Meanwhile, natural gas and reformulatedgasoline are setting a torrid competitive pace inthe electricity and transportation markets,respectively.The greatest threat to sustainable energy forthe 21st century is the global warming scare.Climate-related pressure to artificially con-strain use of fossil fuels is likely to subside inthe short run as a result of political constraintsand lose its “scientific” urging over the longerterm. Yet an entrenched energy intelligentsia,career bureaucrats, revenue-seeking politicians,and some Kyoto-aligned corporations supportan interventionist national energy strategybased on incorrect assumptions. A “realitycheck” of the increasing sustainability of con-ventional energy, and a better appreciation of the circumscribed role of backstop technolo-gies, can reestablish the market momentum inenergy policy and propel energy entrepreneur-ship for the new millennium.
The Increasing Sustainabilityof Conventional Energy
by Robert L. Bradley Jr.
 Robert L. Bradley Jr. is president of the Institute for Energy Research in Houston, Texas, and an adjunct scholar of the Cato Institute. An earlier version of this paper was presented at the 17th Congress of the World Energy Councilin Houston, Texas, in September 1998.
Executive Summary
April 22, 1999No. 341
 
Introduction
Joseph Stanislaw of Cambridge EnergyResearch Associates envisions the energycompany of the 21st century operating undertwo essential assumptions:
•
Oil, gas, and coal are virtuallyunlimited resources to be used inany combination.
•
“Supply security” becomes ”envi-ronmental security.” Technologyhas made it possible to burn allfuels in an environmentallyacceptable manner.
1
Although overshadowed by the post-Kyoto interest in carbon-free energy sources,the technology of fossil-fuel extraction, com-bustion, and consumption continues torapidly improve. Fossil fuels continue to havea global market share of approximately 85percent,
2
and all economic and environmen-tal indicators are positive. Numerous techno-logical advances have made coal, natural gas,and petroleum more abundant, more versa-tile, more reliable, and less polluting thanever before, and the technologies are beingtransferred from developed to emerging mar-kets. These positive trends can be expected tocontinue in the 21st century.Unconventional energy technologies bydefinition are not currently competitive withconventional energy technologies on a sys-temic basis. Oil-based transportation holds asubstantial advantage over vehicles poweredby electricity, natural gas, propane, ethanol,methanol, and other energy exotics in almostall world markets. In the electricity market,natural gas combined-cycle generation has acommanding lead over the three technolo-gies most supported by environmentalists—wind, solar, and biopower—even after correct-ing for the estimated cost of negative exter-nalities.
3
Where natural gas is not indige-nous, liquefied natural gas is becoming asubstitute fuel of choice. In less developednations such as China and India, oil and coaloften set the economic standard as a central-station electricity source, not biopower andintermittent alternatives such as energy fromsunlight and naturally blowing wind.Can the unconventional energies favoredby the environmental lobby to meet the emis-sion-reduction targets of the Kyoto Protocol(essentially requiring the United States toreduce fossil-fuel emissions by one-third by2012) mature into primary energy sources inthe next decades or later in the 21st century?Or will such alternatives continue to be sub-sidy dependent in mature markets and nicheor bridge fuels in remote or embryonic mar-kets? This study addresses those questions,The first section examines trends in fossil-fuel supply and concludes that, contrary topopular belief, fossil fuels are growing moreabundant, not scarcer, a trend that is likely tocontinue in the foreseeable future.The second section investigates the “nega-tive externalities” of fossil-fuel consumptionand finds that they are largely internalizedand becoming more so. Thanks to techno-logical advances and improved practices,environmental quality has continued toimprove to such an extent that
increased fossil- fuel consumption is no longer incompatible withecological improvement 
. Moreover, America’sreliance upon imported oil should not be of major foreign policy or economic concern.The third section considers the econom-ic competitiveness of non-fossil-fuel alter-natives for electricity generation and findsthat a national transition from natural gas,coal, oil, and nuclear power to wind, solar,geothermal, and biomass is simply not con-ceivable today or in the near term ormidterm without substantial economic andsocial costs.The fourth section examines the eco-nomic competitiveness of non-fossil-fuelalternatives for transportation markets andconcludes that rapidly improving gasoline-based transportation is far more economi-cally and socially viable than alternative-fueled vehicles for the foreseeable future.The fifth section examines America’sfailed legacy of government intervention inenergy markets and concludes that environ-
2
Natural gascombined-cyclegeneration has acommandinglead over thethree technologiesmost supported byenvironmentalists.
 
mentalists and some energy planners havefailed to learn the lessons of the past.The sixth section investigates the scienceof global warming and the economics of reducing greenhouse gas emissions. Theissue is important because many analystsbelieve that only by significantly reducing theuse of fossil fuels can we stop global warm-ing. The magnitude, distribution, and timingof anthropogenic warming, however, contra-dict the 1980s and early 1990s case for alarmabout climate. Furthermore, the cost of dis-placing fossil fuels with politically correctrenewable alternatives is so steep that thecosts of preventing anthropogenic warmingswamp the benefits.
The Growing Abundanceof Fossil Fuels
Only a few years ago academics, busi-nessmen, oilmen, and policymakers werealmost uniformly of the opinion that theage of energy scarcity was upon us and thatthe depletion of fossil fuels was imminent.
4
While some observers still cling to that viewtoday, the intellectual tide has turnedagainst doom and gloom on the energyfront. Indeed, resource economists arealmost uniformly of the opinion that fossilfuels will remain affordable in any reason-ably foreseeable future.
Resources As Far As the Eye Can See
Proven world reserves of oil, gas, and coalare officially estimated to be 45, 63, and 230years of current consumption, respectively(Figure 1). Probable resources of oil, gas, andcoal are officially forecast to be 114, 200, and1,884 years of present usage, respectively.
5
Moreover, an array of unconventionalfossil-fuel sources promises that, whencrude oil, natural gas, and coal becomescarcer (hence, more expensive) in thefuture, fossil-fuel substitutes may still bethe best source fuels to fill the gap beforesynthetic substitutes come into play.
3
230634518842001140200400600800100012001400160018002000Proved ReservesProbable Resources
Figure 1World Fossil-Fuel Reserves and Resources
 
Proved ReservesProbable Resoures
Sources: U.S. Department of Energy;
Oil & Gas Journal
;
World Oil
; Enron Corp.;World Energy Council.
CoalNatural GasCrude Oil
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