A new report from the National Research Council examines and, when possible, estimates ‘hidden’ costs of energy production and use, such as the damage air pollution imposes on human health, that are not reflected in market prices of coal, oil, other energy sources, or the electricity and gasoline produced from them.
‘Hidden Cost of Energy: Unpriced Consequences of Energy Production and Use,’ estimates dollar values for several major components of these costs. The damages the committee was able to quantify were an estimated $120 billion in the U.S. in 2005 – a number that primarily reflects health damages from air pollution associated with electricity generation and motor vehicle transportation. The figure does not include damages from climate change; harm to ecosystems; effects of some air pollutants, such as mercury; and risks to national security, which the report examines but does not monetize.
Requested by Congress and sponsored by the U.S. Treasury Department, the report assesses what economists call external effects caused by various energy sources over their entire life cycle – for example, not only the pollution generated when gasoline is used to run a car, but also the pollution created by extracting and refining oil and transporting fuel to gas stations.
Because these effects are not reflected in energy prices, government, businesses and consumers may not realize the full impact of their choices, according to the study.
‘The National Academy of Sciences, in a first-of-its-kind study for the U.S., finds that polluting sources of energy impose a hidden, growing impact on our society that costs billions of dollars – and reminds us of the value and imperative of developing clean, renewable energy sources like wind power,’ says Rob Gramlich, senior vice president for public policy at the American Wind Energy Association.
The committee derived a range of values for damages from climate change; the wide range of possibilities for these damages made it impossible to develop precise estimates of cost. However, all model results available to the committee indicate that climate-related damages caused by each ton of carbon dioxide emissions will be far worse in 2030 than now. Even if the total amount of annual emissions remains steady, the damages caused by each ton would increase by 50% to 80%.
Coal accounts for about half the electricity produced in the U.S. In 2005, the total annual external damages from sulfur dioxide, nitrogen oxides and particulate matter created by burning coal at 406 coal-fired power plants – which produce 95% of the nation's coal-generated electricity – were about $62 billion. These non-climate damages average about $0.32/kWh of energy produced. A relatively small number of plants -10% of the total number – accounted for 43% of the damages. By 2030, non-climate damages are estimated to fall to $0.17/kWh.
The life-cycle damages of wind power, which produces just over 1% of U.S. electricity but has large growth potential, are small compared with those from coal and natural gas.