Fossil Fuels Are Way More Expensive Than You Think

A new paper published in Climatic Change estimates that when we account for the pollution costs associated with our energy sources, gasoline costs an extra $3.80 per gallon, diesel an additional $4.80 per gallon, coal a further 24 cents per kilowatt-hour, and natural gas another 11 cents per kilowatt-hour that we don’t see in our fuel or energy bills.

The study was done by Drew Shindell, formerly of NASA, now professor of climate sciences at Duke University, and Chair of the Scientific Advisory Panel to the Climate and Clean Air Coalition. Shindell recently published research noting that aerosols and ozone have a bigger effect on the climate in the northern hemisphere, where humans produce more of those pollutants.

That research led Shindell to question current estimates of the true costs of our energy sources. Much research has gone into estimating the social cost of carbon, which attempts to account for the additional costs from burning fossil fuels via the climate damages their carbon pollution causes. However, this research doesn’t account for the costs associated with other air pollutants released during fossil fuel combustion.

For example, depending on how much more we value a dollar today than in the future (a factor known as ‘discount rate’), Shindell estimates carbon pollution costs us $32 per ton of carbon dioxide emitted in climate damages, and another $45 in additional climate-health impacts like malnutrition that aren’t normally accounted for.

But Shindell also estimates that carbon emissions are relatively cheap compared to other fossil fuel air pollutants.  For example, sulfur dioxide costs $42,000 per ton, and nitrous oxides $67,000 per ton!  However, less of these other pollutants are released into the atmosphere during modern fossil fuel combustion.

Electric Cars Cheaper than Gasoline Powered
For an average American car (26 miles per gallon), Shindell estimates that the air pollution emissions altogether cost us $1700 in damages per year.  In comparison, emissions from energy to power an electric Nissan Leaf would cost us $840 even if purely powered by coal, and $290 if fueled by electricity supplied entirely from natural gas.  These costs would become negligible if the electricity came from renewable or nuclear power.  Electric vehicles (EVs) are clearly the winners in this cost comparison.

Hence environmental damages are reduced substantially even if an EV is powered from coal-fired electricity, although they are much lower for other electricity sources

The Needed Energy Transition May Have Begun in 2014
The key conclusion from Shindell’s study is that fossil fuels only seem cheap because their market prices don’t reflect their true costs.  In reality they are remarkably expensive for society, but taxpayers pick up most of those costs via climate damages and other health effects.  Those who argue that we need to continue relying on fossil fuels – like former popular science writer Matt Ridley – just aren’t accounting for the costs of pollution.

These air pollution costs are effectively a massive subsidy, and Shindell likely underestimated their size.

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