Question

4. Imagine that you are asked to choose between two businesses (electric companies) that will supply electricity to your home. One of these electric companies burns coal in a facility built in 1963. It has not been retrofitted with pollution-control equipment, but it offers electricity at a relatively low price. The other firm has been retrofitted with pollution-control equipment and generates a large percentage of its electricity from dams, windmills, and solar panels but its price for electricity is almost 50% higher.

Answer 1

The choice here lies between choosing one out of two given electric companies, where one is quite cheap but not eco-friendly whereas the other is enivronmentally clean but very expensive. Since each has its own vices and virtues, the dilemma is no longer between choosing the right over wrong but about choosing the lesser of the two evils.

To do so, short term as well as long term impacts must be considered.

Short-term Requirements:

In the short term, the goal of a consumer is to maximize output and minimize costs. This is fulfilled by the company not possessing a pollution-control equipment, as it is cheaper. Thus, in the short term, choosing the former electric company to supply electricity makes more sense.

Long Term Requirements:

In the long term, a rational consumer aims to maximize output and minimize costs while ensuring sustenance of availability of goods and services. Present actions to achieve these goals are decided on the basis of analyzing current trends and then formulating expectations in the future. Thus, let's analyze what the impacts on the electric industry will be in the long term.

Given the exponentially depleting conventional resources of energy in the present and the grave impacts this depletion and excessive usage are having on the environmental conditions in the form of rising temperatures, the usage of coal in the long term seems unreliable. Coal reserves are predicted to run out by 2088. This run-out will not be sudden but will be preceded by lack of availability of it in various areas. A normal consumer thus cannot rely on anything to be sure of receiving electricity from such a source. An unstable and decreased supply of coal also means receiving intermittent supply of electricity and a soaring rise in price of electricity, which is harmful for the consumer. On the other hand, people will increasingly shift to non conventional sources of energy like dams, windmills and solar panels in the future due to lack of supply of conventional sources, thereby raising prices of these sources too and making them more difficult to be acquired. In such a case, it'll be better to acquire them beforehand. Along with all of this, a rational consumer will also try to avoid such a situation in the future by doing her/his part in preventing it. This can be done by reducing the use of coal and switching to alternative and cleaner sources. Thus, all the aforementioned losses can be avoided by switching to cleaner resources and thus ensuring sustenance of availability of constant electricity.

To conclude, although it may seem feasible to choose the low-priced electricity firm in the short term, after a cost-benefit analysis of the long term period, choosing the eco-friendly source makes more sense despite being quite expensive as it reduces the overall costs in the future and ensures a sustained and continuous reception of electric services by the consumer.