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Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use (NRC, 2009f) estimated that the damages associated with energy production and use in the United States totaled at least $120 billion in 2005, mostly through the health impacts of fossil fuel combustion (and not including damages associated with climate change or national security, which are very difficult to quantify in terms of specific monetary damages). While this is undoubtedly a small fraction of the benefits that energy brings, it reinforces the message that there are significant benefits associated with reducing the use of energy from fossil fuels.

As discussed above and in Chapter 6, limiting the magnitude of future climate change will require significant reductions in climate forcing, and GHGs emitted by the energy sector are the single largest contributor. Hence, many strategies to limit climate change typically focus on reducing GHG emissions from the energy sector. These strategies can be grouped into four major categories: (1) reductions in demand, typically through changes in behavior that reduce the demand for energy; (2) efficiency improvements, or reducing the amount of energy needed per unit of goods and services produced (also called energy intensity) through changes in systems, behaviors, or technologies; (3) development and deployment of energy systems that emit few GHGs or other climate forcing agents, or at least emit fewer GHGs per unit energy consumed than traditional fossil fuel-based technologies; and (4) direct capture of CO2 or other GHGs during or after fossil fuel combustion. These general strategies are discussed briefly in subsequent sections.


The price mechanism can be an important part of any policy intended to reduce energy consumption. Prices encourage efficiency, discussed in the next section, but they can also change behavior. For example, if gasoline prices rise, whether from taxes or market forces, people who commute long distances may buy a more efficient vehicle or they may switch to public transportation or move closer to work. Nevertheless, the impact of prices on consumers and the economy are an important area for further research. It should be noted that prices are not the only feature involved in consumer choice, and the response to increased energy prices (the elasticity of demand) is often modest. There are many possible explanations for this: modest changes in price are not noticed, consumers cannot easily change some aspects of their consumption (for example, it is not always feasible to sell a car with low gas mileage to buy one with higher mileage when gas prices rise, at least in the short run), and there are many other factors that influence decisions that affect energy consumption and in some

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