Katerina Swanson
Fossil fuels are a leading source of air and water pollution, with the economic cost of air pollution in sectors regulated under the Clean Air Act estimated at $9 trillion between 1970 and 2000. The price of fossil fuels varies depending on the source, with petroleum costs being the most volatile. In 2006, American consumers and businesses spent $921 billion on fossil fuels, with expenditures likely topping $1 trillion in 2008. Fossil fuel prices are influenced by global events and markets, with the cost of electricity rising at double the rate of inflation in recent years. The true cost of fossil fuels to society is often underestimated, with externalities such as healthcare, falling crop yields, and lost workdays not reflected in market prices.
| Characteristics | Values |
|---|---|
| Fossil fuels cost in the United States electric power industry | $3.12 per million British thermal units (Btu) in 2023 |
| Cost range | $2.36 per million Btu for coal to $16.53 per million Btu for petroleum |
| Average cost of petroleum in 2022 | Peaked during the global energy crisis |
| Natural gas prices | Vary based on the region |
| Fossil fuel expenditures in the United States | $1.3 trillion out of $1.6 trillion total fossil fuel costs on oil alone (if oil prices reach $200 per barrel by 2030) |
| Fossil fuel expenditures in the United States in 2006 | $921 billion |
| Fossil fuel expenditures in the United States in 2008 | Likely topped $1 trillion |
| Fossil fuel expenditures in the United States annually | More than 70% spent on oil |
| Fossil fuel expenditures in the United States in 2007 | More than $360 billion on imports, with most spent on crude oil |
| Fossil fuel costs for electricity generation | Up to $0.22 per kilowatt-hour (kWh) |
| Renewable energy costs | As low as $0.04 per kilowatt-hour (kWh) |
| Fossil fuel use costs | Environmental, social, and economic costs |
| Economic cost of air pollution in sectors regulated under the Clean Air Act from 1970 to 2000 | $9 trillion |
| Health risks of air pollution | Respiratory ailments, increased risk of death from cardiovascular and pulmonary diseases, cancer, infant mortality, damage to the nervous system and brain, potential contribution to psychiatric disorders and diabetes |
| Number of premature deaths linked to air pollution annually | 9 million (Lancet, 2022) |
| Number of premature deaths linked to particulate matter contained in emissions from combustion annually | 50,000 |
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What You'll Learn
Fossil fuel prices are lower than their true cost to society
Fossil fuels are a leading source of energy in the United States, with the country depending on them for 85% of its energy supply. In 2023, fossil fuels cost about $3.12 per million British thermal units (Btu), with coal costing $2.36 per million Btu and petroleum costing $16.53 per million Btu. However, these prices do not reflect the true cost of fossil fuels to society.
The use of fossil fuels imposes significant environmental and social costs. For example, fossil fuel production and use are major sources of air and water pollution, which have negative impacts on human health and the environment. The economic cost of air pollution in sectors regulated under the Clean Air Act has been estimated at $9 trillion between 1970 and 2000, with costs resulting from pollution-induced early mortality, illness, healthcare expenses, and lost productivity. Additionally, global warming caused by fossil fuel emissions can lead to declining rainfalls, rising temperatures, and increased drought conditions, further impacting agriculture and public health.
The price of fossil fuels also does not account for the social costs of carbon dioxide emissions, including healthcare, falling crop yields, lost work and school days, and higher insurance premiums due to extreme weather events. While the US government has proposed "social cost" accounting to price carbon dioxide emissions, scientists argue that these calculations underestimate the true costs. For instance, when environmental and health damages are considered, the cost of coal increases from 10 cents per kilowatt-hour to 42 cents per kilowatt-hour, according to Professor Shindell's economic models.
Furthermore, the true cost of fossil fuels includes the economic impact of dependence on foreign oil. In 2007, the United States spent over $360 billion on importing fossil fuels, primarily crude oil. This represents a significant transfer of wealth from American consumers to oil companies and foreign governments. As global oil supplies become increasingly strained, the United States could spend $1.3 trillion on oil alone by 2030.
In summary, the prices of fossil fuels do not reflect their true cost to society, including environmental, social, and economic impacts. By undercharging for these costs, there is excessive consumption of fossil fuels and insufficient investment in clean technologies. Raising the price of fossil fuels to reflect their true social cost would reduce energy use and encourage a transition to cleaner energy sources, mitigating the effects of climate change.
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The US could save money by reducing fossil fuel emissions
Fossil fuels are a leading source of air and water pollution, and the economic cost of air pollution in sectors regulated under the Clean Air Act has been estimated at $9 trillion between 1970 and 2000, with costs resulting from pollution-induced early mortality, illness, health care costs, and lost productivity. In 2006, American consumers and businesses spent $921 billion on fossil fuels, more than the nation spent on education or the military. In 2008, national expenditures on fossil fuels likely exceeded $1 trillion for the first time. Each year, more than 70% of this money is spent on oil, with over $360 billion spent on imports, the majority of which is crude oil. This is a direct transfer of wealth from American consumers to oil companies and foreign governments.
The United States could save money by reducing its dependence on fossil fuels and investing in clean energy sources. Fossil fuel production and use impose environmental and social costs beyond those related to global warming. For example, global warming is expected to reduce global per-capita consumption by as much as 20%. Additionally, the United States could reduce its emissions of global warming pollution by approximately 1.2 billion metric tons of carbon dioxide per year (equal to about 20% of today's fossil fuel emissions) with net dollar savings.
The cost of constructing renewable energy sources has decreased significantly in recent years, making them more cost-competitive with fossil fuels. Onshore wind and solar with storage can cost as little as $0.04 per kilowatt-hour (kWh), while fossil fuels can cost up to $0.22 per kWh. Additionally, the sun, wind, and hydropower sources are free, unlike fossil fuels.
There are also ways for individuals to reduce their fossil fuel consumption and save money. For example, individuals can switch to electric heating and water heating, which can significantly decrease emissions and save money. Heat pump water heaters are more efficient than conventional electric water heaters and are eligible for rebates. Additionally, individuals can invest in energy-efficient appliances, which can save both energy and money in the long run.
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Fossil fuel use has massive environmental and economic costs
The combustion of fossil fuels is the leading contributor to global warming, which poses an existential threat to humanity and is projected to inflict massive economic damage. Global warming is expected to cause rising temperatures, declining rainfalls, and large-scale droughts. The increased acidity of the oceans, a result of absorbing carbon dioxide from fossil fuel emissions, poses threats to coral reefs, fishing, tourism, and the economy. Extreme weather events, such as wildfires, hurricanes, wind storms, flooding, and droughts, are becoming more frequent and severe due to climate change, with the cost of these events in the United States between 2016 and 2020 estimated at $606.9 billion. Additionally, the rise in sea levels caused by oceanic and atmospheric warming puts cities like New York, Miami, and New Orleans at greater risk of storm damage.
Fossil fuels are a leading source of air and water pollution, with the economic cost of air pollution in sectors regulated under the Clean Air Act estimated at $9 trillion between 1970 and 2000, encompassing costs from early mortality, illness, healthcare, and lost productivity. The health impacts of fossil fuel pollution disproportionately affect communities of color and low-income communities, with higher exposure to particulate matter pollution. Furthermore, the production and transport of fossil fuels can lead to catastrophic accidents, such as oil spills, resulting in significant removal costs and compensation for damages.
Transitioning to renewable energy sources offers a solution to reducing these environmental and economic costs. Onshore wind and solar energy are now the cheapest sources of energy, even compared to fossil fuels, with prices continuing to drop as technology improves. Investing in clean energy can lead to economic savings and help reduce emissions, providing a more sustainable future.
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Fossil fuel prices are volatile and subject to global market changes
The volatility of fossil fuel prices has significant effects on inflation and the economy. Energy prices are a key driver of inflation, and in Canada, they accounted for a third of overall inflation from February 2021 to June 2022. Fossil fuel price volatility can disrupt the economy, affecting businesses, employment, and productivity. Consumers may benefit from lower prices during periods of decline, but abrupt price drops can lead to uncertainty and challenges for households and businesses when prices rebound.
The United States' dependence on fossil fuels for 85% of its energy supply results in high expenditures. In 2006, American consumers and businesses spent $921 billion on fossil fuels, and by 2008, expenditures likely exceeded $1 trillion. Oil accounts for a significant portion of these costs, with the majority of money spent on importing crude oil going to oil companies and foreign governments.
To address the volatility and high costs associated with fossil fuels, transitioning to renewable energy sources is essential. Onshore wind and solar are now the cheapest sources of energy, with costs as low as $0.04 per kWh compared to up to $0.22 per kWh for fossil fuels. Government investment in a rapid transition to renewable energy is crucial for future energy price stability, and well-designed climate policies can support affordability and a net-zero economy.
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Fossil fuel use has serious health impacts and costs
Fossil fuels are a leading source of air and water pollution, with serious health impacts and costs. Burning fossil fuels releases greenhouse gases, particulate matter, and other forms of pollution, including additives found in gasoline such as benzene, toluene, ethylbenzene, and xylene. These emissions contribute to climate change and have negative health effects, including respiratory issues like asthma, reduced lung function, heart disease, premature births, and premature deaths. Globally, fossil fuel pollution is responsible for one in five deaths, with higher impacts on communities of color, low-income communities, and children.
The economic cost of air pollution in sectors regulated under the Clean Air Act has been significant, estimated at $9 trillion between 1970 and 2000, with costs resulting from pollution-induced early mortality, illness, healthcare expenses, and lost productivity. The annual cost of the health impacts of fossil fuel-generated electricity in the United States alone is estimated to be up to $886.5 billion. Additionally, the cost of extreme weather events influenced by climate change, such as wildfires, hurricanes, wind storms, flooding, and droughts, further contributes to the financial burden.
The dependence on fossil fuels also has economic implications. In 2006, American consumers and businesses spent $921 billion on fossil fuels, exceeding spending on education or the military. By reducing this dependence and transitioning to renewable energy sources, significant economic savings can be achieved. For example, a 2007 analysis estimated that the United States could reduce its emissions of global warming pollution by 20% with net dollar savings.
The health and economic costs of fossil fuel use are substantial, and addressing these impacts is crucial for protecting public health and promoting a sustainable future. Transitioning to renewable energy sources not only mitigates environmental and climate change impacts but also offers economic benefits, underscoring the importance of investing in a new energy future.
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Frequently asked questions
In 2006, American citizens and businesses spent $921 billion on fossil fuels, which was about 7% of America's gross domestic product. By 2008, expenditures on fossil fuels likely topped $1 trillion for the first time.
In 2023, fossil fuels cost about $3.12 per million British thermal units (Btu), ranging from $2.36 per million Btu for coal to $16.53 per million Btu for petroleum.
Fossil fuels are a leading source of air and water pollution. The economic cost of air pollution in sectors regulated under the Clean Air Act has been estimated at $9 trillion between 1970 and 2000, with costs resulting from pollution-induced early mortality, illness, health care, and lost productivity.
