to the prevailing price level and to judgments about the risks of disruption and the economic response to a disruption. Nevertheless, these sources agree that Leiby’s estimates are reasonable representations of the costs of U.S. dependence on oil. Furthermore, the National Research Council (NRC, 2002b) used Leiby’s work as the basis for estimating the side benefits to energy security associated with more stringent fuel economy standards.


These sources estimate that the value of reduced oil consumption (in 2007 dollars) averages about 15 cents per gallon of gasoline,3 although the range of estimated values is broad. For example, Leiby (2007) estimates a range of 10-30 cents per gallon, and Parry et al. (2007) suggests a range of 8-50 cents per gallon. In addition, the estimates could change substantially with variations in oil prices and average fuel economy of the automobile fleet. In particular, as oil prices drop, the value of the ancillary benefit drops as well.


Reducing the use of coal and natural gas does not affect energy security because they are supplied almost entirely from domestic sources and neither presently displaces oil in the transportation sector. Furthermore, the electric power sector uses very little oil and so does not affect domestic economic vulnerability to oil dependence. Note that some actions taken to enhance energy security can actually exacerbate climate change. For example, if Canadian oil sands or coal-based syn-fuels were to substitute for imported petroleum, greenhouse gas (GHG) emissions could rise because of the energy-intensive production processes involved.

Air Pollution

In addition to creating CO2, the combustion of fossil fuels produces a variety of pollutants controlled under the Clean Air Act, including particulate matter (PM), nitrogen oxides (NOX), volatile organic compounds (VOCs), and carbon monoxide (CO), which contribute to the formation of photochemical smog that has adverse human health effects. Coal combustion in the electric sector produces sulfur oxides (SOX), NOX, and PM that not only injure human health but also damage vegetation and acidify lakes and streams. The process of coal mining is also a source of considerable damage to the environment and human health (e.g., Palmer et al., 2010).


Emissions of these pollutants have been significantly reduced since the implementation of the Clean Air Act in the early 1970s. Nevertheless, some emissions remain and continue to create adverse effects for human health and natural ecosystems. NRC

3

One cent per gallon of gasoline is roughly equivalent to one dollar per ton of CO2-eq.



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