Environmental Externalities and Air Pollution
We live and work in a world driven by a fossil fueled economy. Our cars and other dominant forms of transport run primarily on gasoline derived from oil. We heat and cool our homes and work places from electric utilities heavily dependent on natural gas, coal and oil.
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Solutions to the problems range from calls for greater energy efficiency to increased reliance on renewable energy sources to more stringent pollution control regulations.
Often the primary argument against these 'pollution solutions' begins with a logic of cost. Opponents to these policy options might suggest that renewable energy sources may be a good idea, but they cost more to produce a KWH of electricity than their fossil fuel counterparts.
In recent years, environmentalists with a keen sense of economics have confronted the cost argument head on. They've adopted many economic models to show that the price of a gallon of gas or a KWH of electricity is not always as transparent as the cost listed on the billboard at the gas station or on your utility bill.
The concept of 'environmental externalities' can be used to offer a different perspective on the costs of a fossil fueled economy.
In economics, the term externalities refers to activities of individuals (or firms) that affect other non-involved individuals. The most publicized issue of externalities today is probably the issue of second hand smoke. Smokers, so the logic goes, harm not only themselves, but others who breath their smoke second hand, when they smoke inside poorly ventilated buildings. This would be considered a negative externality.
Externalities can also be categorized as positive. For example, individuals who sweep the sidewalks in front of their homes or stores provide positive benefits (externalities) to all other individuals who use those sidewalks.
The issue of negative externalities is most prominent in the public utility business. For example, when the cost of electricity is calculated, factors such as the price of the fuel (i.e., coal, oil etc.) operating expenses of the plant, are taken into account. Historically, however, the production and use of of fossil fuel energy has involved many costs that have not been calculated into the production costs. They are costs or negative externalities transferred to others, and they are commonly broken down into three issue areas, security, environment, and health.
While the United States is blessed with an abundance of natural resources, including oil, it is still heavily dependent on imported oil from the Middle-east. Our dependence means that the U.S. has a strategic security interest in maintaining stability in this politically volatile region of the world. When Iraq invaded Kuwait back in 1990, the U.S. response cost the taxpayers billions of dollars.
Fifteen years later (2005) and more than a few strategic bombing campaigns and a full blown war later, the costs of maintaining stability in the region has not only cost the US taxpayer hundreds of billions of dollars, but also has cost us the blood of our young.
In economic terms, this cost is a negative externality. It's a non-calculated cost of producing a barrel of oil or a gallon of gas. It's a cost that does not show up at the pump. It shows up on the tax statement and/or letter to a grieving home.
With respect to the environment, fossil fuel production creates a host of negative externalities. For example, fossil fuel energy production is the primary contributor of the greenhouse gasses (GHG) associated with climate change. All of the costs of the potential problems associated with climate change, loss of coastal land, dramatic weather changes causing floods or drought etc. are not costs that are or will be borne by the energy producers. They will borne by those directly affected in the U.S. and around the world. One need go no further than the Adirondacks of New York to discover that the costs of the cleanup from acid rain and the losses from fish kills and dead rivers and lakes are costs related to the coal burning power plants in the Mid-west.
Health issues also add uncalculated costs to fossil fuel energy production. During the past decade thousands of research projects documenting the ill effects produced by the fossil fuel energy production process have been published. For example, the National Resource Defense Council (NRDC) recently released a report called Danger in the Air stating that "Every year, some 64,000 people may die prematurely from cardiopulmonary causes linked to particulate air pollution".
In summary, if all the costs associated with fossil fuel energy production were borne by the energy producers then the cost of producing this type of energy would be substantially higher. A gallon of gasoline at the pump would be higher, and your electricity bill would be higher. To find out how high, please check out one of the related articles.
© 2000-2005. Patricia A. Michaels. All rights reserved.