When we buy gasoline,the cost includes finding the oil,getting the oil out of the ground,refining the oil,and selling the oil (now gasoline),with transportation and profits mixed throughout.These costs are included in the purchase price.
But some costs are not included in the consumer purchase price,nor are they paid for by the energy companies.
These costs include environmental degradation,pollution,climate change,"petrodictatorship",energy insecurity,biodiversity loss,and health issues,to name a few.
These "added costs",which are not included in the price we pay,are called negative externalities.
The true cost of something includes these negative externalities.
"True cost economics is an economic model that seeks to include the cost of negative externalities into the pricing of goods and services."-from Investopedia.com
So,how does this all this relate to energy?
"Burning fossil fuels costs the United States about $120 billion a year in health costs, mostly because of thousands of premature deaths from air pollution, the National Academy of Sciences reported...
The estimates by the academy do not include damages from global warming, which has been linked to the gases produced by burning fossil fuels. The authors said the extent of such damage, and the timing, were too uncertain to estimate.
Nor did the study measure damage from burning oil for trains, ships and planes. And it did not include the environmental damage from coal mining or the pollution of rivers with chemicals that were filtered from coal plant smokestacks to keep the air clean...
Coal burning was the biggest single source of such external costs . The damages averaged 3.2 cents per kilowatt-hour.
The worst plants, generally the oldest and burning coal with the highest sulfur content, were 3.6 times worse than the average, with a cost of nearly 12 cents per kilowatt-hour.
The committee said environmental damage from gasoline and diesel fuel cost 1.2 cents to 1.7 cents per mile. A co-author of the study, Daniel S. Greenbaum, president of the Health Effects Institute, said that would come to 23 cents to 38 cents per gallon..."-From the New York Times
The Union of Concerned Scientists says,
"Since such costs are indirect and difficult to determine, they have traditionally remained external to the energy pricing system, and are thus often referred to as externalities. And since the producers and the users of energy do not pay for these costs, society as a whole must pay for them. But this pricing system masks the true costs of fossil fuels and results in damage to human health, the environment, and the economy."
According to a 2000 study for the Department of Energy, there is a significant cost attached to the mere fact of our dependence. Supply disruptions, price hikes, and loss of wealth suffered through the oil market upheavals have cost the U.S. economy around $7 trillion (1998 dollars) over the 30 years from 1970 to 2000.
We need to keep in mind a few things:
-These externalities are real,actual costs.They are not made up. -You are paying for them more than you realize.Often people say (or think),"My energy is already expensive,how could I afford the true cost of energy, if the externalities were to be recognized?" The answer is that someone,somewhere,is paying for these negative externalities.And sometimes that "someone" is you. Sometimes you pay for something you didn't even do.So let the ones at fault pay for it.
-A price tag cannot be put on these externalities.All figures that we try to come up with are estimates.How much is a clean river worth? How much is avoiding cancer worth? How much is clean air worth? These things are priceless,and thus,the cost of including all negative externalities in the pricing of fossil fuels is infinite.
So,after looking at it that way,maybe cheap coal isn't so cheap after all.
References:
http://library.thinkquest.org/26026/Economics/internalizing_costs.html
http://www.nytimes.com/2009/10/20/science/earth/20fossil.html?_r=2
http://www.ucsusa.org/clean_energy/technology_and_impacts/impacts/the-hidden-cost-of-fossil.html
There is more than one direct cost;
ReplyDeleteHow about the social welfare consisting of zero taxes paid by large oil companies, while the poor and middle class pay the rich and large oil companies? How?
These oil companies get their 'welfare' subsidies, received by all oil, coal and nuclear power companies from taxpayer money. What is the cost? HUGE and not included at the pump price.. You pay separately for that.
How about the monopoly hold on power that these companies have on political and social systems, including housing, transportation, military, jobs, innovation, education, etc...?
What would this world and our country be like without oil company monopolies? For starters we would still have mass transportation systems in all major cities. These were ripped out by oil companies, since they needed to sell more cars.. If there is no trolley or train, then that forces consumers to buy more cars, right? Yea, but what did that cost us?
Oil companies also suppressed and denied access to competitive alternative energy companies and technologies; at what cost to us, in order to keep up dependent on them?
One cost, is that we have ZERO infrastructure for anything other than carbon fuels... Hydrogen would be a good choice, as it is a 'zero carbon fuel' if produced from wind, water or solar, but carbon companies keep that suppressed and funding is limited for expanding this fuel and technology source. Schools and colleges do not teach this simple fact about hydrogen either. Why not? Same reason they do not teach about alternatives to the healthcare monopoly; PROFITS and a monopoly stranglehold on the market.
Thanks for another thought-provoking post. I'm going to do more research on "true cost economics" -- I was familiar with the concept (and agree with it), but hadn't heard that specific term. It's a great term, "true cost economics," and I think it has the potential to gain wider political/ideological traction, precisely because of the effective way in which it is worded.
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