« Fed Watch: Patting Themselves on the Back? | Main | The Derivatives Market’s Helpful Enemies »

Wednesday, May 18, 2011

"The True Cost of Carbon"

A reminder that, all things considered, energy costs are too low:

The True Cost of Carbon, by David Leonhardt: Michael Greenstone and Adam Looney, economists at The Hamilton Project, are releasing a new paper on the costs of American energy policy. They argue:

… our energy choices are based on the visible costs that appear on utility bills and at the gas pump. This system masks the social costs arising from those energy choices, including shorter lives, higher health care expenses, a changing climate, and weakened national security. As a result, we pay unnecessarily high costs for energy.

For example, Mr. Greenstone and Mr. Looney estimate that a coal plant must spent 3.2 cents to produce a kilowatt hour of electricity (and consumers then pay slightly more than this). This price appears to be a bargain, the economists write, but the true costs — once health costs, military costs and the like are taken into account — are more than twice high: 8.8 cents per kilowatt hour.

The paper calls for four steps that will be familiar to anyone who follows climate policy: a carbon tax or cap-and-trade system; more money for research and development; more efficient regulations; and negotiations with foreign countries over similar steps elsewhere. In the foreseeable future, all these steps all seem to be an enormous long shot. But the climate problem is not going away. ...

Describing the chances of action on climate policy as "an enormous long shot" seems optimistic in this political environment.

    Posted by on Wednesday, May 18, 2011 at 12:33 AM in Economics, Environment, Policy, Regulation | Permalink  Comments (27)


    Feed You can follow this conversation by subscribing to the comment feed for this post.