Unveiling the Hidden Costs of Energy Use

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Energy companies opposed to climate legislation often use one prediction to paint their position as a kind of defense of the consumer: Your heating bill, or your price at the pump, will go up if they’re forced to invest in new technology or purchase carbon offsets.

It’s hard to dispute the assumption that a costly transition to a carbon-free economy won’t trickle down to the rate-payer. But the counterargument, sure to take center stage as Congress takes up a climate bill this winter, says you’re already paying more than you think for the energy you use. You just don’t recognize it.

Currently not embedded in your gas price, or your kilowatt-per-hour charge for power, are such costs as the cleanup of pollution, the health care for neighbors who inhale it or the defense it takes to secure global sources of oil. Economists call them externalities; the rest of us might call them “social costs.”

Today, the National Research Council released a 374-page report, commissioned by Congress, that tries to put a price tag on some of those factors, converting an abstract debate into the kind of language policymakers understand best.

The study, “Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use,” tabs the cost in 2005 of such damages at $120 billion.

That figure — a conservative estimate, the report’s authors stress — reflects mostly health damages from air pollution associated with driving vehicles and generating electricity. And most of that money comes not from the health care costs of treating asthma or bronchitis but from the premature deaths the pollution can lead to.

More daunting is the list of factors the 19-member panel said they did not or were not able to quantify in the total: The figure doesn’t include harm to ecosystems or national security, or the effects of climate change, which are harder to predict and monetize. They also examined only major air pollutants like sulfur dioxide, nitrogen oxides and ozone, and not other harmful substances like mercury.

The report hedges on any kind of policy recommendation. Giving one wasn’t in the NRC’s mandate. But the report’s conclusion — notable as it comes from a nonpartisan entity affiliated with neither tree-huggers nor any trade group — is revealing:

“When market failures like this occur,” the report says, “there may be a case for government interventions in the form of regulations, taxes, fees, tradable permits or other instruments that will motivate such recognition.”

In other words, maybe it’s time to find a way to turn the hidden costs into actual ones to better grasp what’s at stake.

Underscoring how deeply buried many of these costs are, the report focused on the entire life cycle of energy production and use, including, for example, not just tailpipe emissions from driving cars but the damages inherent in building them in the first place. Highway transportation (not counting trains or planes) accounted for $56 billion of the total.

Coal plants, often the face of pollution in environmental campaigns, were responsible for $62 billion of the $63 billion in damages from electricity (natural gas, which produces 20 percent of America’s electricity compared to coal’s 50 percent, was responsible for less than a billion dollars). The report — and The Idea Lobby — invite you to draw your own conclusions.

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