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The "Cost-Energy Equivalence Law"

"Energy, the Source of All Costs"
Can Costs affect Climate Change?

Dr. Heinz Schütte

The "Cost-Energy Equivalence Law" formulates the scientific definition of the connection between costs and energy consumption:

"Without exception, 100% of all of the costs occurring in the world economic system result from the consumption of energy".

It was possible to derive this connection, which has been suspected for some time, from a physical law of nature. This proof is based exclusively on the statement of that physical law of nature without any additional assumptions or postulations, so that the Cost-Energy Equivalence Law itself satisfies the requirements of a law of nature. The derivation of the proof was published in the scientific journal "LIST FORUM für Wirtschafts- und Finanzpolitik", Vol. 38 (2012), No. 3-4, pp.138-146. The English-language version of the paper is available in PDF format Download.

Costs as a Source of CO2

The Cost-Energy Equivalence Law formulates a completely new definition of the term "costs" in the field of global economics which bears significant consequences especially concerning the Climate Change. Costs are an integral part of the global economic system and thus a decisive factor in the prevention of climate change. In addition to the natural desire to design one's own costs to be as low as possible, the question of how costs are actually incurred will arise. That question is answered in the paper "The Cost-Energy Equivalence Law". On the basis of a fundamental physical law, it is proven that all of global costs result, without exception, from energy consumption.

The energy needed for the generation of global costs is available in the form of primary energy sources such as coal, oil, gas, nuclear energy and solar energy in the form of radiation, wind and hydraulic power. The share of coal, oil and gas in the total global use of these primary energy sources has remained unchanged over many decades at about 90%; when used through combustion, the chemically equivalent volume of CO2 is emitted.

The 2016 economic year in Germany will serve in the following presentation as the economic context.

The volume of energy from coal, oil and gas used in a closed economic area in one economic year is known and can be stated in the form of kilowatt hours. Thus, the volume of CO2 created through combustion, which can be calculated in the form of kilograms, is also known. In Germany, the consumption of the primary energy sources of coal, oil and gas in 2016 was a total of 2.990 billion kilowatt hours. The volume of CO2 this emitted was 910 billion kilograms.

As is shown in the paper "The Cost-Energy Equivalence Law", the deployed primary energy is converted into labor. In this way, goods, and thus assets are created. Labor is performed by human beings through the application of their physical and mental powers, and by machines that were created in the previous time periods as long-lasting assets. Both human and machine labor is based on the use of the existing, long-lasting assets from previous creation of value such as real property, vehicles, financial assets, wealth of human knowledge, and similar long-lasting goods. The sum of all assets that are generated in a closed economic area in one economic year is documented as GDP in the form of standardized currency units and is thus known. In accordance with its definition, the GDP is identical to the sum of the costs in euros that must be paid to purchase these assets. In 2016, the GDP, and thus the volume of costs in Germany was 3.133 billion euros.

The situation in Germany in 2016 was as follows: The generation of the GDP and thus of a volume of costs of 3.133 billion euros resulted, by definition, from the total use of all primary energy sources. The share in energy for the generation of this cost volume provided directly from the sun as a primary energy source, which represented the sole energy source prior to the industrial revolution, as shown in the paper "The Cost-Energy Equivalence Law", cannot be measured and is thus unknown. The portion of the energy applied to generate this cost volume which results from coal, oil and gas is known. It was 2.990 billion kWh and led to the emission of 910 billion kg CO2. Thus, in addition to the unknown volume of solar energy, a total of 2.990 billion kWh of coal, oil and gas was used to generate the cost volume of 3.133 billion euros. This results in a use of 0.95 kWh coal, oil and gas per euro of costs with a corresponding CO2 emission of 0.29 kg CO2 per euro costs.

These quotients apply for the entire economic area of Germany. Due to the homogeneous nature of the cost structure in a closed economic area and the mathematically supported, total equal distribution of the deployed energy over the cost volume, these quotients are universally valid, however, for each individual euro. With each euro spent in 2016, 0.29 kg CO2 was emitted by necessity and without exception. By their very nature, these quotients also apply, of course, for the costs that arise in the production of "renewable energy". Contrary to the claim that "renewable energy" is free of CO2 emissions, 0.29 kg CO2 was released into the environment with every euro spent for the production of "renewable energy". These real economic facts open up a new, as yet completely unknown perspective on energy policy and expose "renewable energy" as a creator of CO2.

Because the cost of electricity from "renewable energy" is many times higher than the comparable costs in a classic coal-fired power plant due to the lower availability of wind and sunshine and their additional unpredictability, "The Cost-Energy Equivalence Law" comes to the astounding realization that electricity from renewable energy exhibits a significantly higher consumption of fossil fuels than electricity from coal-fired power plants and thus emits more CO2 than coal-fired power plants.

The conversion of the cost structure to more cost-efficient "renewable energy" plants, which is being continually announced because of the rising costs for coal, oil and gas, has proven to be a fundamental error because the lion's share of the primary energy sources from coal, oil and gas will continue to exist in the foreseeable future. The rising costs for these fossil energy sources necessarily increase the costs for "renewable energy".

The reduction of CO2 emissions through "organic production" in agriculture, the use of "biofuel", the use of products from "waste recycling" and "electric cars" as propagated by politicians to reduce CO2 emissions prove to be a political misconception that is divorced from reality. Without exception, all of these products have higher manufacturing costs than their traditional competitors and thus necessarily result in a higher consumption of primary energy sources and thus in higher CO2 emissions.

"The Cost-Energy Equivalence Law" declares – based on the state of scientific knowledge – the logically understandable fact that the use of "renewable energy" and the manufacture of "organic products" result in higher CO2 emissions than the equivalent, comparable traditional products. If the CO2 generated by humans is the cause of climate change, the production of "renewable energy" and the production of "organic products" must therefore immediately cease.

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