The Price of the Brown Economy—The Hidden Cost of Energy

The reality is that the continued use of fossil fuels is having a huge impact on our environment in the form of climate change, air pollution, the loss of biodiversity and other issues, however such environmental impacts are not reflected in the energy costs for the industries and the public. According to an International Monetary Fund (IMF) 2015 report ,1 the air pollution, greenhouse effect, traffic congestion, etc., caused by Taiwan's fossil fuel use resulted in external costs of US$29 billion in 2015. Based on Taiwan's annual GDP of US$570 billion, the external costs of fossil fuels would amount to more than 5% of the overall GDP.


• The neglect of external costs has resulted in unreasonable electricity prices.

  • However, the IMF estimates did not take into account the costs of mineral extraction or the release of harmful air pollutants such as arsenic and mercury, and as such, using the European Commission's 'Subsidies and costs of EU energy' report, the National Taiwan University's Risk Society and Policy Research Center conducted an initial assessment of the external costs of various power generation technologies (such as coal-fired power generation, gas-fired power, renewable energy, and nuclear energy), and estimated that the external costs derived from Taiwan's power system would be as high as NT$560 billion. This is almost equivalent to the total electricity expenditure paid by the Taiwanese public which amounted to about NT$600 billion, therefore if Taiwan were to internalize its current environmental external costs into its electricity prices, the electricity price would need to increase by 93%, to NT$5.6 per kWh.


• We are paying the price for the consequences of the brown economy.

  • At present, Taiwan's current low energy prices are due to overprotective government policies which have ignored the 'bubbles' created by government finances and the impact to individual health, as can be seen from the fossil fuel subsidies and current electricity prices which do not reflect the external costs. It is precisely because of our long-term reliance on the brown economy for our economic development, that has led to our current predicament, where we are constantly trying to rationalize or ignore these external costs, thereby creating the structural problems that have become difficult to resolve today.


1 International Monetary Fund (IMF) (2015), “IMF Survey: Counting the Cost of Energy Subsidies.” In International Monetary Fund. Retrieval Date: 2016/10/20.