Requested by Congress, 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. When such market failures occur, a case can be made for government interventions -- such as regulations, taxes or tradable permits -- to address these external costs, the report says.
The committee that wrote the report focused on monetizing the damage of major air pollutants -- sulfur dioxide, nitrogen oxides, ozone, and particulate matter – on human health, grain crops and timber yields, buildings, and recreation. When possible, it estimated both what the damages were in 2005 (the latest year for which data were available) and what they are likely to be in 2030, assuming current policies continue and new policies already slated for implementation are put in place.
The committee also separately 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 CO2 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 50 percent to 80 percent.
Damages From Electricity Generation
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 percent of the nation's coal-generated electricity, were about $62 billion; these nonclimate damages average about 3.2 cents for every kilowatt-hour (kwh) of energy produced. A relatively small number of plants -- 10 percent of the total number -- accounted for 43 percent of the damages. By 2030, nonclimate damages are estimated to fall to 1.7 cents per kwh.
Burning natural gas generated far less damage than coal, both overall and per kilowatt-hour of electricity generated. A sample of 498 natural gas fueled plants, which accounted for 71 percent of gas-generated electricity, produced $740 million in total nonclimate damages in 2005, an average of 0.16 cents per kwh. As with coal, there was a vast difference among plants; half the plants account for only 4 percent of the total nonclimate damages from air pollution, while 10 percent produce 65 percent of the damages. By 2030, nonclimate damages are estimated to fall to 0.11 cents per kwh. Estimated climate damages from natural gas were half that of coal, ranging from 0.05 cents to 5 cents per kilowatt-hour.
The life-cycle damages of wind power, which produces just over 1 percent of U.S. electricity but has large growth potential, are small compared with those from coal and natural gas. So are the damages associated with normal operation of the nation's 104 nuclear reactors, which provide almost 20 percent of the country's electricity. But the life cycle of nuclear power does pose some risks; if uranium mining activities contaminate ground or surface water, for example, people could potentially be exposed to radon or other radionuclides; this risk is borne mostly by other nations, the report says, because the U.S. mines only 5 percent of the world's uranium. The potential risks from a proposed long-term facility for storing high-level radioactive waste need further evaluation before they can be quantified. Life-cycle CO2 emissions from nuclear, wind, biomass, and solar power appear to be negligible when compared with fossil fuels.
Damages From Heating
The production of heat for buildings or industrial processes accounts for about 30 percent of American energy demand. Most of this heat energy comes from natural gas or, to a lesser extent, the use of electricity; the total damages from burning natural gas for heat were about $1.4 billion in 2005. The median damages in residential and commercial buildings were about 11 cents per thousand cubic feet, and the proportional harm did not vary much across regions. Damages from heat in 2030 are likely to be about the same, assuming the effects of additional sources to meet demand are offset by lower-emitting sources.
Damages From Motor Vehicles and Fuels
Transportation, which today relies almost exclusively on oil, accounts for nearly 30 percent of U.S. energy demand. In 2005 motor vehicles produced $56 billion in health and other nonclimate-related damages, says the report. The committee evaluated damages for a variety of types of vehicles and fuels over their full life cycles, from extracting and transporting the fuel to manufacturing and operating the vehicle. In most cases, operating the vehicle accounted for less than one-third of the quantifiable nonclimate damages, the report found.
Damages per vehicle mile traveled were remarkably similar among various combinations of fuels and technologies -- the range was 1.2 cents to about 1.7 cents per mile traveled -- and it is important to be cautious in interpreting small differences, the report says. Nonclimate-related damages for corn grain ethanol were similar to or slightly worse than gasoline, because of the energy needed to produce the corn and convert it to fuel. In contrast, ethanol made from herbaceous plants or corn stover -- which are not yet commercially available -- had lower damages than most other options.
