Market Externalities of Fossil Fuels
By Moises Velasquez-Manoff, Staff writer of The Christian Science Monitor / November 20, 2009
A new report by the National Research Council seeks to put a dollar amount on the “hidden” costs of energy produced by burning fossil fuels.
These costs aren’t factored into the market prices of coal, oil, and gasoline, or the prices of electricity generated by fossil fuels, the report says. But someone eventually pays for them.
The report found that, in 2005, the hidden costs of energy production with fossil fuels in the United States amounted to $120 billion. This includes the negative impact of air pollution on health, but doesn’t include the effects of mercury emitted by coal-fired plants on wildlife and people, harm done to ecosystems by air pollution, or the climate-warming effects of carbon emissions (which the Stern Report estimated to be a drag on global GDP of 20% by the turn of the Century, a very conservative estimate).
Coal-fired plants produce about half the nation’s electricity. The report found that pollutants like sulfur dioxide, nitrogen oxides, and particulate matter cost the US $62 billion. That works out to about 3.2 cents’ worth of “nonclimate” damages for every kilowatt-hour (kWh) generated.
Natural gas had fewer hidden costs than coal. Four hundred ninety-eight natural-gas-powered electric plants caused about $740 million in damages. That’s about 0.16 cents per kWh, or 1/20th of the damage produced by coal.
Vehicles, meanwhile, which account for 30 percent of US energy use, produced $56 billion in damages. That works out to between 1.2 and 1.7 cents’ worth of hidden costs per mile traveled (and $.30-.40 per gal for an average vehicle) . (Estimates from NRDC calculate all costs for fuel closer to $10 per gal.)
Climate considerations aside, damages wrought by ethanol made from corn were usually similar to, or even slightly worse, than damages from gasoline. That’s because of the extra energy needed to convert corn to ethanol .
(It’s estimated that a $300 per ton of CO2 would internalize these costs and raise fuel prices around $1.50)