Step 1 for my thesis was to try and motivate the transition to a zero-carbon electricity grid, and I felt like the best way to do that was to try and put a dollar value on the costs we don’t pay for electricity - the electric bill doesn’t cover the externalities associated with pollution.
My supervisor sent me this paper by Goodkind et al. that made the claim
We estimate that anthropogenic PM2.5 was responsible for 107,000 premature deaths in 2011, at a cost to society of $886 billion. Of these deaths, 57% were associated with pollution caused by energy consumption [e.g., transportation (28%) and electricity generation (14%)]
So that’s it, right? $886B in total damages from US pollution overall, times 14% that’s due to electricity generation specifically. Not so fast. 14% is a remarkably round number for the scale of billions of dollars, so I had to dig through their appendix first to see the actual breakdown. As it turns out, the real breakdown is $118B for coal, $5B for natural gas, and another $2B for everything else. Slap on an inflation adjustment factor to move from 2011 dollars to 2020 dollars and we’re at $147 billion.
The catch is that the Goodkind paper doesn’t predict damages in dollars. It predicts damages in lives. That’s where the folks at the EPA (yes, the Environmental Protection Agency, of all places) come in, with the Value of a Statistical Life (VSL). The VSL converts the number of lives saved (here, 107,000) to a dollar value: currently, standard operating procedure is to use $7.4M in 2006 dollars, and just inflation-adjust that. Today, saving a statistical life is worth $9.6 million.
This allows us to get more than one estimate on the pollution costs from the US electricity sector. Fann et al. estimated that electricity emissions results in 38,000 premature deaths in 2005, which translates to $380B (in 2020 dollars) in damages - a much higher estimate.
Jaramillo and Muller (who also use the VSL method) find that electricity generation in 2011 caused $125B in damages (just like Goodkind!), which translates to $146 billion in today’s dollars (due to differences in rounding). They also found that electricity generation in 2005 caused $210B worth of damages in 2020 dollars, and attribute the overall decline over time to “increasingly stringent air pollution policy (either proposed or enacted), and macroeconomic conditions inclusive of the Great Recession”.
Let’s recap: Goodkind et al. and Jaramillo/Muller found that damages from US electricity production in 2011 were $146B (inflation-adjusted). Jaramillo/Muller and Fann et al. found that values from previous years were much higher. That variance can be explained by the fact that these estimates are derived from the cleanliness of the power grid - the US electricity sector is far cleaner today than it was in 2011, which is cleaner than it was in 2005. There’s been an enormous shift in energy sources (e.g. wind and natural gas play a much larger role than they used to), and modern fossil fuel plants are far more efficient than those built decades ago (though this latter point is unlikely to influence the results in a major way, since the difference between a coal plant from 2005 and a coal plant from 2011 isn’t that large).
I won’t attempt to estimate numbers for 2020, though I can confidently say that pollution damages are far lower. Goodkind and Jaramillo/Muller both found that the lion’s share of damages come from SO2 and NOx emissions (Goodkind says 91% on pages 20-21 of the appendix, Fig. 2 indicates similarly from Jaramillo/Muller), that most of these emissions come from coal (again, pages 20-21 of the appendix of Goodkind), and SO2 and NOx emissions have tanked in the past couple of decades. The location of those emissions complicates the relationship between emissions and costs, but a ~50% reduction in those emissions likely means that, thankfully, the power sector doesn’t destroy ~$150B in human life each year - at least due to SO2 and NOx emissions.
I must admit, I was perversely hoping for a higher number. I wanted to motivate my paper the highlighting the importance of transitioning to a zero-carbon electricity grid, but most of the work has already been done! Luckily for me, the externalities aren’t just pollution - climate change is likely to affect far more than a few hundred thousand lives.