Why You’re Not Paying Nearly Enough for Fossil Fuel

Source: Thinkstock
Source: Thinkstock

As you may have read and heard before, particularly here on The Cheat Sheet, the vast majority of Americans are getting off pretty easy on their energy bills. That is, we’re not paying nearly enough for things like gasoline, diesel, coal, and other fossil fuels. One reason is because these industries are all heavily subsidized — so, you’re paying for it in the form of taxes — but the things that are largely going untaxed and unpaid for are the externality costs of using these resources.

Specifically, the amount of pollution put into the environment as a result of burning fossil fuels, and the monetary cost at which that pollution can be offset. A new paper has put that relatively ambiguous concept into simple dollars and cents, and it’s become clearer than ever that Americans are getting a hell of a bargain.

According to Drew T. Shindell, accounting for pollution would add an extra $3.80 per gallon of gasoline, and $4.80 per gallon of diesel to our bills. Natural gas costs an additional 11 cents per kilowatt-hour, and coal would cost an additional 24 cents per kilowatt-hour.

“Society’s will to reduce emissions is influenced by costs as well as benefits,” Shindell writes:

Beyond health, additional impacts of emissions such as ocean acidification, biodiversity loss, ecosystem impacts of nitrogen deposition, and changes in visibility are omitted, suggesting that these damages are conservative and leaving ample opportunities to further improve the comprehensiveness of social cost metrics.

Clearly, the use of fossil fuels is vastly more expensive — not necessarily in a monetary sense — than we presently take into account. Not only are we paying in our health, but also at the expense of the environment. While conceptually many people may have been aware of that, putting a price tag on the costs can really help others visualize the true costs associated with fossil fuels.

Shindell’s paper is pretty dense, but is summarized fairly well by The Guardian. For example, Shindell explains that the average American car, which gets 26 miles per gallon in fuel economy, costs society an additional $1,700 per year. Electric cars, he says, are much less damaging from an environmental standpoint, even if the electricity being used to charge them is generated through the burning of coal or natural gas.

Again, the underlying finding of Shindell’s work is very well captured by The Guardian’s Dana Nuccitelli. “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.”

The end result, Nuccitelli says of Shindell’s work, is that these costs, since they go unpaid for, in effect amount to an enormous subsidy for the industry.

The good news? Things have likely already begun swinging in another direction. Renewable energy is being adapted and implemented rapidly in many countries, and before long, wind and solar will make up a substantial percentage of our energy production. As the scientific data piles up, it’s becoming clear that it will be far more expensive in the long run to ignore the impact of pollution from fossil fuels than to simply make the investment now and adopt cleaner alternatives.

While it’s true that the infrastructure for renewables — think solar panels and wind turbines — are expensive, they are slowly but surely becoming much more affordable. In fact, the International Renewable Energy Agency says that solar panels have dropped nearly 70% in price since 2008, and that these price reductions will spur widespread adoption, eventually phasing out fossil fuels altogether.

One thing that may have produced a hiccup in that process was the unexpected and ongoing plummet in oil prices, which has likely played a part in many consumers’ decisions. Some individuals might have bought an Escalade rather than a Tesla, for example, as gas is significantly cheaper than before. But as we know, that won’t last forever.

The real question is, what happens if we start to add the cost of pollution to our energy bills? The answer is that we probably stampede toward renewable energy at an even faster rate. After all, it usually boils down to the mighty dollar. And as fossil fuels become more expensive and scarce in the long run, they will get priced out of the market.

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