The True Cost of Carbon

energy consumption
The True Cost of Carbon

New York Times, May 18, 2011
By DAVID LEONHARDT

Michael Greenstone and Adam Looney, economists at The Hamilton Project, are releasing a new paper Wednesday on the costs of American energy policy. They argue:

… our energy choices are based on the visible costs that appear on utility bills and at the gas pump. This system masks the social costs arising from those energy choices, including shorter lives, higher health care expenses, a changing climate, and weakened national security. As a result, we pay unnecessarily high costs for energy.

For example, Mr. Greenstone and Mr. Looney estimate that a coal plant must spend 3.2 cents to produce a kilowatt hour of electricity (and consumers then pay slightly more than this). This price appears to be a bargain, the economists write, but the true costs — once health costs, military costs and the like are taken into account — are more than twice high: 8.8 cents per kilowatt hour.

The paper calls for four steps that will be familiar to anyone who follows climate policy: a carbon tax or cap-and-trade system; more money for research and development; more efficient regulations; and negotiations with foreign countries over similar steps elsewhere. In the foreseeable future, all these steps all seem to be an enormous long shot. But the climate problem is not going away.

In addition to being the director of the Hamilton Project, Mr. Greenstone is an M.I.T. professor and one of the country’s leading environment economists. More from the paper follows:

 

Our primary sources of energy impose significant health costs on our citizens — particularly among infants and the elderly, our most vulnerable. For instance, even though many air pollutants are regulated under the Clean Air Act, fine particle pollution, or “soot,” is estimated to still contribute to roughly one out of every twenty premature deaths in the United States (EPA 2010b). Indeed, soot from coal power plants alone is estimated to cause thousands of premature deaths and hundreds of thousands of cases of illness each year….

The social costs associated with using carbon-intensive fuels also include climate change. If carbon dioxide (CO2) emissions continue to rise at the current rate, they are likely to drive temperature changes that have significant environmental and health consequences: rising sea levels, storms that are more frequent and more severe, increased flooding and drought, and other dramatic changes in weather patterns. These changes in turn could result in an increase in water- and insect-borne diseases as well as in the loss of biodiversity and, due to floods or droughts, the loss of human lives and livelihoods….

 

 
Finally, there are other economic, political, and national security risks associated with current domestic energy policies. Oil still plays an important role in the American economy: it powers most of our transportation sector and is an important input in many industries. Continuing turmoil in the Middle East has raised the profile of energy security and the geopolitical implications of reliance on oil. In part to protect major oil supplies, the United States has maintained a military presence in the Middle East for more than 50 years. On several occasions, it has become mired in military interventions in part to prevent oil supply disruptions, among other objectives.

 

Full text pdf available here: A Strategy for America’s Energy Future

 

 

energy consumption
Projections of World Energy Consumption (EIA 2010)

 

Date: 

Thursday, May 19, 2011

Source: 

New York Times

Associated Joint Program People: 

Greenstone, Michael