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Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use
mercial, and industrial sectors. We estimated damages that remained in 2005 after regulatory actions had taken place as well as damages expected to remain in 2030 in light of possible future regulations. Our boundaries for analysis were not identical in all sectors, but we sought to use existing data and methods for well-recognized externalities. We did not attempt to develop wholly new methods for estimating impacts and damages, but we did identify areas where additional research would be particularly valuable.
For electricity generation and production of heat, we focused on monetizing downstream effects related to air pollution from coal-fired and gas-fired processes. Upstream effects and other downstream effects have been quantified but not monetized or have been discussed in qualitative terms. We did not assess effects associated with power-plant construction, and we did not assess effects from methane emissions from transporting natural gas by pipeline for heat. For transportation, we monetized effects related to air pollution for essentially the full life cycle, including vehicle manufacture. We considered climate-change effects associated with energy production and use, and we reviewed various attempts that have been made in the literature to quantify and monetize the damages associated with the effects of climate change. We also considered the literature on a variety of damages that are associated with the nation’s energy infrastructure: disruption in the electricity transmission grid, vulnerability of energy facilities to accidents and possible attack, external costs of oil consumption, supply security considerations, and national security externalities.
The committee focused its attention on externalities as generally defined by economists. As discussed in Chapter 1, there are many other distortions that occur in markets related to energy production and consumption that may create opportunities for improvement of social welfare but that are not externalities. There are also equity or “fairness” consequences of market activities. Although other distortions and equity concerns may be appropriate for policy formulation, they are beyond the scope of this study and were not considered.
LIMITATIONS IN THE ANALYSES
Estimating most of the impacts and damages involves a several-step process based on many assumptions; this process is true for even relatively well-understood impacts. In summarizing our results, we attempt to convey the uncertainty surrounding our estimates. The results of the committee’s study should be considered in light of important caveats. Although our analysis was able to consider and quantify a wide range of burdens and damages (for example, premature mortality resulting from exposure to air pollution), there are many potential damages that we did not quantify. Therefore our results should not be interpreted as a full accounting. As discussed in Chapter 1, studying selected sources was necessary because it