Clean Energy Will Lower Household Energy Costs

Fossil fuels are driving up consumer energy costs, in part as a result of the industry’s exposure to the very climate disruptions it is continuing to worsen. These rising costs are yet another great reason to invest in clean energy now. Yet in a darkly ironic twist, fuel prices have been used as an excuse to delay the popular Build Back Better Act, despite the fact that its investments in clean energy are the ideal response to high fossil fuel costs.

Indeed, investing in clean energy would directly reduce household energy costs by an average of $500 per year, protect the economy from volatile fossil fuel markets, and slow the pace of climate disruption.

Fossil fuels are increasing consumer costs

The consumer price index (CPI) has been making headlines in recent months, leading to arguments about inflation risks and avoiding new federal spending even if it is fully paid for. Such claims allow transitory price changes to obscure deeper questions of affordability and ignore the value of the federal investments themselves in promoting economic growth.

Abstract discussions of inflation miss another important detail: the degree to which price changes in general are being driven by specific changes in energy prices. As the U.S. Bureau of Labor Statistics reports, energy costs contributed more to the increase in consumer prices this past month than did any other category—with energy up 25 percent but all other items excluding food up only 4 percent. For four months in a row, energy prices have pushed up the CPI.

Sen. Joe Manchin (D-WV) seemed to reference this recently when he said, “We are in the middle of an energy crisis.” However, it is important to examine what is causing the increase in energy cost—unsurprisingly, it involves climate change—as well as what can be done to protect consumers: investing in clean energy.

Fossil fuels are volatile and costly in many ways—for our pocketbooks, for our health, and for our climate.

In a typical year, the cost of fossil fuel constitutes roughly three-quarters of all energy expenditures. Indeed, in 2019, the most recent year reported, the U.S. economy spent $25 billion on coal, $150 billion on natural gas, and $700 billion on petroleum, which amounted to 72 percent of all energy expenditures. Since then, the price of natural gas per million British thermal units of energy has more than doubled, from $2.05 to more than $5.50, and the price of crude oil has risen by a third, from $61 per barrel to more than $80 per barrel. This has driven the CPI for energy up 16 percent since January 2020 and, more recently, up 36 percent since the COVID-19-era minimum in May 2021.

Energy costs can present a significant financial hardship for households, causing some families to take out high-interest short-term loans to pay their bills, face having their utilities disconnected, and risk using hazardous space heaters or ovens for heat. In the past year, more than a quarter of low-income households—including disproportionate shares of Black and Hispanic households—reported that they were unable to pay all of their energy bills.

Policymakers must support these households with direct financial assistance and by examining the root causes of fossil fuel price volatility.

The fossil fuel industry is vulnerable to extreme weather

One of the major reasons why fossil fuel prices have been rising is the industry’s vulnerability to extreme weather. Even as fossil fuels continue to contribute to climate change, the industry is taking a beating from erratic arctic weather patterns in the winter, extreme heat in the summer, and stronger hurricanes—all stressors that are being exacerbated by climate change.