A2. Emissions Costs from US Electricity Production
To understand the need to transition to a zero-carbon power grid, it’s important to first examine the negative externalities associated with power generation (the costs we don’t pay for electricity), e.g. from air pollution.
A paper by Goodkind et al. [i] estimates “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%)]”. Specifically, annual air-pollution damages are estimated at $118B for coal, $5B for natural gas, and another $2B for everything else (e.g. biomass, oil, and other sources) [ii]. Adjusting for inflation [1], we find that the authors estimate $147 billion in annual damages incurred in 2011.
An examination of methodology reveals that Goodkind et al. are actually predicting damages in lives, not dollars. The conversion factor is the EPA’s Value of a Statistical Life (VSL) [iii], which converts the number of lives saved (for Goodkind, 107,000) to a dollar value. The EPA’s VSL is set at $7.4M in 2006 dollars, just inflation-adjusting that reveals that saving a statistical life is worth $9.6 million [2]. Knowing the VSL allows us to obtain dollar figures from other papers that report estimates for premature deaths due to pollution from the US electricity sector. Fann et al. [iv] estimate that electricity emissions resulted in 38,000 premature deaths in 2005, which translates to $380B (in 2020 dollars) in annual damages using the VSL method - a much higher estimate than Goodkind et al.
Jaramillo and Muller [v] (who also use the VSL method) estimate that electricity generation in 2011 caused $125B in annual damages, which translates to $146 billion in today’s dollars (a very similar result to Goodkind). They also estimate that electricity generation in 2002 caused $242 billion in damages; electricity generation in 2005 caused $210B worth of damages; and electricity generation in 2008 caused $161 billion in damages (all numbers have been converted to 2020 dollars). Variance between years is partially attributable to lower emissions, that the authors note is driven by “increasingly stringent air pollution policy (either proposed or enacted), and macroeconomic conditions inclusive of the Great Recession”, and partially attributable to a difference in the valuations of damages per marginal ton of pollutant [3].
The variance between the Goodkind et al., Fann et al., and Jaramillo and Muller papers can largely be explained by the fact that these estimates are calculated at different times, as the Jaramillo and Muller paper results demonstrate. The cleanliness of the power grid changes over time - 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 [vi] 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).
Goodkind and Jaramillo/Muller both found that the lion’s share of damages come from SO2 and NOx emissions (Goodkind et al. note 91% of damages from these two classes of molecules; Fig. 2 indicates similarly from Jaramillo/Muller), and that most of these emissions come from coal. However, data from the US Energy Information Administration indicate that SO2 and NOx emissions have dramatically fallen in the past couple of decades [vii]. While the location of those emissions complicates the relationship between emissions and costs, a ~50% reduction from 2011 to 2017 in those emissions likely means that any estimate for pollution externalities from the US power sector is likely to be in the tens of billions of dollars (as opposed to hundreds of billions). However, this estimate is derived from analyzing premature deaths in the US, which may undervalue the damage due to CO2 or leaking methane, both of which contribute to climate change, which in turn is likely to affect far more than a few hundred thousand lives in just one nation.
[1] Using the inflation calculator at https://www.bls.gov/data/inflation_calculator.htm, I adjust from 2011 dollars to 2020 dollars.
[2] Most premature deaths from air pollution are likely to be disproportionately older people, unlike other sources of premature death (for example, due to traffic collisions, domestic violence, etc.) As a result, if we were to use an alternative methodology of calculating damages based on the Value of a Statistical Life-Year (i.e. calculating the number of years of life lost prematurely), these damage estimates would likely drop. The EPA notes that using VSLY isn’t as common, as the necessary assumptions in the distribution of ages in premature deaths are “large”.
[3] At a high level, the cost associated with one pollutant may change from year to year due to the geographic distribution of those emissions. Emissions released in a dense urban area cause more health effects than those released at a power plant far away from population clusters; Jaramillo and Muller incorporate this into their model to obtain changing values for marginal damages per ton of any given pollutant in any given year.