National Research Council report quantifies hidden costs of energy

The National Research Council’s Committee on Health, Environmental, and Other External Costs and Benefits of Energy Production and Consumption released, “Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use” on October 19. Dean Richard Revesz is a member of the committee. Commissioned by Congress in 2005, the report attempts to put a dollar value on the “hidden” effects—those not included in the market prices of coal, oil, and other energy sources—of delivering energy to users.

Over its lifetime, the gasoline used to fuel a car helps contribute more pollution than just the fumes exiting the tail pipe; the pollution caused by extracting and refining oil and transporting fuel to gas stations has a negative effect on the environment also, but is not factored into market prices. Using data from 2005, the committee estimated that the damage of sulfur dioxide, nitrogen oxides, ozone, and particulate matter on human health, grain crops and timber yields, buildings, and recreation cost the United States $120 billion. The report says that with these costs out of sight, government and other decision makers, such as electric utility managers, may not recognize the true costs of their actions. “When market failures like this occur, 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,” the committee states in its executive summary. The report accounts only for the effects of air pollution on human health and does not factor other potential hidden costs of energy due to the effects of pollution on climate change and ecosystems, rising food prices and risks to national security.

The committee makes no specific policy recommendations, but instead offers that its report serve as a guide for policy-makers: “It is thus our hope that this information will be useful to government policy makers, even in the earliest stages of research and development on energy technologies, as an understanding of their external effects and damages could help to minimize the technologies’ adverse consequences.”

Posted on October 27, 2009

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