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Social Cost of Carbon

Social Cost of Carbon

| On 06, Oct 2013

Social Cost of Carbon Up To One-Third of All US Health Care Costs

► Fossil fuel electricity creates hundreds of billions of dollars of economic losses each year from health impacts in the U.S.

► The economic value of health impacts is significantly higher than retail costs or the estimated social cost of carbon.

► Consumers should be willing to pay 2–4 times retail costs for emission free alternatives to fossil fuel electricity.

Social Cost of CarbonA report from the Environmental Protection Agency (EPA) puts the social costs of carbon-based fuel use in electricity generation at between $361.7–886.5 billion annually in the United States alone, representing 2.5–6.0% of the national GDP and up to one-third of annual US health care costs.

Social cost of carbon, or SCC, also called “external costs” or “externalities”, refers to costs associated with fossil fuel harvesting, distribution and combustion practices that are borne by society and do not appear in the retail prices cited for power generation fuels like coal and methane.  SCC includes impacts on human health, future costs of climate change and localized environmental damage.

The study, led by researchers Ben Machol and Sarah Rizk at the EPA’s Clean Energy and Climate Office in San Francisco, focused on human health only, quantifying the health impacts associated with Nitric Oxide and Nitrogen Dioxide (NOx) and Sulfur Dioxide (SO2) on a per kilowatt-hour basis.

They found that nationally, the average economic value of health impacts associated with fossil fuel usage is between $0.14 and $0.35 per kilowatt-hour.  The average cost of electricity in the US in 2012 was around 10 cents per kilowatt-hour.  Their conclusion is that consumers across residential and commercial sectors should be willing to pay at least two to four times their current rates for cleaner sources of electricity that have lower social costs.

The EPA’s research and conclusions jibe with similar and separate studies out of Harvard Medical School and Massachusetts Institute of Technology, which focused solely on coal, and both studies concluded that SCC was at least double that of the private costs.  That is, Harvard and MIT estimate the true cost of using coal for electricity production as three times that which is paid via utility bills.

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