Fossil fuel prices don’t reflect true cost of carbon, report says 

Source: Manon Verchot, E&E reporter • Posted: Wednesday, March 11, 2015

Prices at the pump don’t reflect the true cost of fossil fuels, according to a new study. When you add together the environmental, health and social costs of continuing business as usual with fossil fuel extraction and use, all of society gets billed, not just the consumer, it finds.

The bill may not show up when the tank is full, but it manifests itself in health care costs and environmental damages. For every gallon of gasoline, society gets a $3.80 extra charge, while for every gallon of diesel, the cost is an additional $4.80, the study says. Natural gas costs twice as much, and coal-fired electricity costs four times as much.

“Solar and wind are not so expensive when you consider the hidden costs of fossil fuels,” said Drew Shindell, a professor of climate sciences at Duke University, who conducted the study. His work is the first to link the cost of air pollution and the release of carbon into the atmosphere in the same study.

“The people working on climate are not always the same people working on air quality — they’re different skill sets; they use different models,” said Jason Hill, an associate professor at the University of Minnesota, who did not contribute to the research. “It’s really good to see people looking at air quality impacts alongside climate change.”

Some costs not included

Shindell evaluated the effects of atmospheric release of air pollutants, like methane and aerosols, and the effects of carbon release on human health and the environment. He found that what car owners may not pay in fueling their car, they may pay in hospital bills when their child has an asthma attack. And if the car owner isn’t paying, someone else in society is.

These costs also extend to other health risks, including premature death and costs of missed work and school days. On an environmental scale, society is paying for all the lower or failed crop yields and the extreme weather events linked to climate change, according to the study. As long as markets don’t place a price on emissions, polluters will not pay for these costs, Shindell said.

“We care about the social cost of carbon or the social cost of atmospheric release because we want to make good choices and we want to make informed choices,” Hill said.

Understanding the social cost of carbon and atmospheric pollutants can help countries develop policies and market barriers to address the risks. U.S. EPA uses these calculations to assess whether rulemakings have climate benefits. But there are limitations that make calculating these costs difficult.

These types of studies don’t establish who is most affected by problems. They also can’t account for all the factors that will influence societal cost, including issues like ocean acidification and biodiversity. For example, climate change has been linked to mental health issues, while air pollution can be linked to reduced IQ, but neither one of these factors has been sufficiently studied to accurately calculate their costs, which means that any social cost of carbon is a conservative estimate, according to Shindell.

Still, knowing that the cost of carbon and air pollution is high, even without including additional factors, can be informative. “I think it helps people make better choices,” Shindell said.