The True Cost of Fossil Fuels

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Climate change is already creating more frequent heat waves, droughts, fires, and floods.

Map: USDA Farm Services Agency

Cheap fossil fuels historically have assured continuing growth to our economy, but now their negative impacts are mounting. Nonetheless, our nation's policies, subsidies and tax codes still heavily favor hydrocarbon energy. Oil, gas, and coal remain undeservedly cheap, and their wastes are dumped into our common atmosphere for free, as if it were an open sewer. All of us, and the living systems that support us, bear enormous costs associated with their use.

There are different ways to measure these costs and assess their impact upon society and the environment. A recent report, "Climate Vulnerability Monitor: A Guide to the Cold Calculus of A Hot Planet," finds the impacts cost the world more than $1.2 trillion, a whopping 1.6 percent of global GDP.[1] It was written by more than 50 scientists, economists and policy experts, and was commissioned by 20 governments.

Social Cost of Carbon

The Social Cost of Carbon (SCC) is the US government's estimate of how much carbon emissions harm the economy. This is a measure of climate change impacts. US government's 2013 mid-range estimation of the SCC is $35 per ton, revised from 2010 at $26 per ton.

However, the E3 Network (Economics for Equity & Environment), a national group of economists, estimates that CO2 actually costs far more than federal current estimates, contending that the government analysis omits many of the biggest risks of climate change, and downplays the impacts of climate change on future generations. E3 points out that if the SCC were higher, it would bring much more urgency to the value of reducing emissions.[2]

A higher SCC incentivizes efficiencies in appliances and autos; it is not the same as a carbon tax, as it is narrower in effect.

Other Costs

The Center for Investigative Reporting (CIR) estimates the true cost of a gallon of gasoline is upwards of $15.00 per gallon, by factoring in externalities, such as climate disruption, oil spills, and health impacts from air pollution. Other hidden costs include military defense of oil supply lines, subsidies, and maintaining the Strategic Petroleum Reserve.[3] 

Paul Epstein, with the Harvard School of Public Health, found that coal's hidden costs—climate disruption, public health impacts, pollution, toxic waste—were $345 billion per year (median estimate).[4] The costs are higher than the electricity provided by coal is worth. The public bears the costs of increased asthma, heart attacks, and pulmonary issues. Coal burning releases radiation, heavy metals, and other toxins. It is the largest source of airborne mercury, now seeping into every habitat. Coal ash is our second-largest source of toxic waste.

Fossil fuel extraction impacts (such as CO2 emissions and groundwater pollution) are particularly growing, as producers are increasingly using lower-grade reserves (see Extreme Extraction). Our oceans and marine life are threatened by fossil fuels in several ways:  ocean acidification, dead zones, and the plastics crisis.

Including the Costs

If these damages were factored in to the actual prices for carbon fuels, renewable energy would become much more competitive. We must begin now to phase in the costs by using a carbon fee policy, with an annual rising price that is stiff enough that the playing field becomes clearly favorable for renewable energy.


[1] DARA and Climate Vulnerable Forum, "Climate Vulnerability Monitor: A Guide to the Cold Calculus of A Hot Planet,"    Also see: Fiona Harvey, "Climate change is already damaging world economy, report finds," The Guardian, September 25, 2012.

[3] "The Price of Gas," Center for Investigative Reporting, June 13, 2011.

[4] Paul Epstein, "Full cost accounting for the life cycle of coal," Harvard School of Public Health, February 2011.


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