THE PERVERSE
SUBSIDIES OF FOSSIL FUELS
We Don't Just Pay at the Pump
"The Bush administration plans to oppose an international drive to phase out fossil fuel subsidies and increase financing for nonpolluting energy sources worldwide, administration officials said today. ... The White House says its opposition to the proposals is based on a desire to let the marketplace, rather than government, decide how quickly renewable energy sources are adopted worldwide." --New York Times, July 14, 2001
In this excerpt from Perverse Subsidies: How Tax Dollars Can Undercut the Environment and the Economy, Myers and Kent explain how the fossil fuel industry is propped up by all of us through hidden subsidies. Pollution from fossil fuels incurs billions of dollars in damages each year, but fossil fuel companies can ignore these costs, leaving the taxpayer to foot the bill.
Fossil fuels cause many environmental problems apart from the better-known forms of pollution, including landscape scars, mining tailings, and oil spills. While these are generally local in scope and often ephemeral in nature, they can cause considerable loss of amenity to immediate communities. Their collective cost, in billions of dollars worldwide, is not to be dismissed just because it does not match the more widespread injuries deriving from fossil fuels, such as urban smog, acid rain, and global warming.
It is the grosser-scale types of pollution, however, that we shall consider here, notably from sulfur dioxide, nitrogen oxide, particulates, and carbon dioxide, all of which stem primarily from use of fossil fuels. (Certain of these costs are covered in the next chapter, on road transportation, so they are not touched upon here in order to avoid double counting.) ...
Acid rain has long been attributed to fossil-fuel pollutants, among other factors. The environmental harm imposed by acid rain is well known, though there are only a few estimates of economic costs. For example, the health benefits of controlling acid rain in the United States are in the order of $12-$40 billion per year. ... (In Britain, a program to reduce sulfur dioxide emissions, the main source of acid rain, confers benefits worth $29 billion per year, mostly in terms of human health.) ...
In Europe, there is an annual loss of commercial timber worth $30 billion. There is also some emergent injury to tropical forests, as manifested already in southern China, where "acid haze" causes $14 billion worth of damage per year. It should shortly affect several other sectors of tropical forests, notably those that have acidic soils and hence are very vulnerable to acid rain, with a total expanse of more than 1 million square kilometers, or over one-eighth of remaining tropical forests. Extensive as this tropical forest damage could be, there is no indication of how costly it could eventually become.
There are still other costs from air pollution. Each year, Germany loses $4.7 billion in agricultural production, especially crops; Poland loses $2.7 billion; Italy, $1.8 billion; and Sweden, $1.5 billion.
Relatively small reductions in fossil-fuel emissions worldwide, together with their fine particulates, could save some 700,000 lives annually by 2020. While four out of five of these saved lives would be in developing countries, the number in developed countries such as the United States would equal the number of projected deaths from traffic injuries or infection by HIV. This analysis does not take account of health benefits through avoidance of illness and lost workdays, nor does it consider deaths associated with pollutants other than particulates.
Because of these fine particulates, urban residents in China will, under a business-as-usual scenario, face health costs rising from $32 billion (or $129 per resident exposed) in 1995 to almost $98 billion (or $197 per resident) in 2020; these costs include 600,000 premature deaths, 5.5 million cases of chronic bronchitis, more than 5 billion restricted-activity days, and 20 million cases of respiratory illness each year. When adjusted to the projected increases in income, the costs in 2020 will total more than $390 billion, or 13 percent of China's GDP.
Despite these many instances of environmental externalities stemming from fossil fuels (let alone nuclear energy), there is no way to come up with a quantified estimate of all environmental externalities in the fossil-fuel sphere. But several items are certainly indicative: annual health costs from air pollution in Indonesia, $0.5 billion, and in India, $1.7 billion; health costs from acid rain in the United States, $12-$40 billion (say $20 billion), and in Britain, $29 billion; timber losses from acid rain in Europe, $30 billion; agricultural costs from air pollution in four European countries, $10.7 billion; health costs in China, $32 billion; acid haze damages in China, $14 billion; and cost of lives lost to particulate pollution in the United States, $240 billion. Let us exclude the last item, valid though it is in itself; if we considered all such premature deaths in the developed countries, that item alone would approach, if not exceed, $1 trillion, making it an extreme "outlier." The other items total $138 billion.
The calculation of these other items is limited to a degree. For instance, they cover only three developing countries and almost entirely with respect to health costs. They cover only four European countries with respect only to agricultural costs, and they cover Europe as a whole with respect to acid rain damage only to timber supplies. So a reasonable estimate, albeit very rough and ready, for all environmental externalities worldwide surely runs to several hundred billion dollars. Conversely, not all the pollutants stem from fossil fuels, just the majority. The reader will readily think of various other qualifications. In order to come up with an estimate of some order, the authors postulate a total of $200 billion per year. Preliminary and exploratory (even speculative) as this is, it is more realistic than to say we cannot quantify these externalities in worthwhile fashion at all and hence imply that their value is nil.
Click here to read "Bush Misunderstands the Marketplace," the first excerpt from Perverse Subsidies.
This story is protected by copyright and cannot be reprinted without the permission of the author.
We Don't Just Pay at the Pump
Norman Myers and Jennifer Kent are the authors of Perverse Subsidies: How Tax Dollars Can Undercut the Environment and the Economy (Island Press, 2001).
"The Bush administration plans to oppose an international drive to phase out fossil fuel subsidies and increase financing for nonpolluting energy sources worldwide, administration officials said today. ... The White House says its opposition to the proposals is based on a desire to let the marketplace, rather than government, decide how quickly renewable energy sources are adopted worldwide." --New York Times, July 14, 2001
In this excerpt from Perverse Subsidies: How Tax Dollars Can Undercut the Environment and the Economy, Myers and Kent explain how the fossil fuel industry is propped up by all of us through hidden subsidies. Pollution from fossil fuels incurs billions of dollars in damages each year, but fossil fuel companies can ignore these costs, leaving the taxpayer to foot the bill.
Fossil fuels cause many environmental problems apart from the better-known forms of pollution, including landscape scars, mining tailings, and oil spills. While these are generally local in scope and often ephemeral in nature, they can cause considerable loss of amenity to immediate communities. Their collective cost, in billions of dollars worldwide, is not to be dismissed just because it does not match the more widespread injuries deriving from fossil fuels, such as urban smog, acid rain, and global warming.
It is the grosser-scale types of pollution, however, that we shall consider here, notably from sulfur dioxide, nitrogen oxide, particulates, and carbon dioxide, all of which stem primarily from use of fossil fuels. (Certain of these costs are covered in the next chapter, on road transportation, so they are not touched upon here in order to avoid double counting.) ...
Acid rain has long been attributed to fossil-fuel pollutants, among other factors. The environmental harm imposed by acid rain is well known, though there are only a few estimates of economic costs. For example, the health benefits of controlling acid rain in the United States are in the order of $12-$40 billion per year. ... (In Britain, a program to reduce sulfur dioxide emissions, the main source of acid rain, confers benefits worth $29 billion per year, mostly in terms of human health.) ...
In Europe, there is an annual loss of commercial timber worth $30 billion. There is also some emergent injury to tropical forests, as manifested already in southern China, where "acid haze" causes $14 billion worth of damage per year. It should shortly affect several other sectors of tropical forests, notably those that have acidic soils and hence are very vulnerable to acid rain, with a total expanse of more than 1 million square kilometers, or over one-eighth of remaining tropical forests. Extensive as this tropical forest damage could be, there is no indication of how costly it could eventually become.
There are still other costs from air pollution. Each year, Germany loses $4.7 billion in agricultural production, especially crops; Poland loses $2.7 billion; Italy, $1.8 billion; and Sweden, $1.5 billion.
More important is pollution from fine airborne particles, that is, those that have an aerodynamic diameter of ten microns or less and are able to move thousands of kilometers (carbon particulates from smokestacks in Beijing have been tracked to Hawaii), whereupon they cause severe and even lethal respiratory infections. These pollutants (together with other contaminants from fossil fuels) are taking one year off the lives of American people living in cities, and as many as 60,000 people die prematurely each year from particulate air pollution. The putative "life value" of these deaths is $240 billion. Worldwide, at least 460,000 avoidable deaths occur every year as a result of particulates, and by 2020 there will have been over 8 million such deaths if current patterns of fossil-fuel use continue. In California alone, particulates cause 3,000 deaths per year and an additional 60,000-200,000 cases of respiratory infections in children.Air pollutants (together with other contaminants from fossil fuels) are taking one year off the lives of American people living in cities.
Relatively small reductions in fossil-fuel emissions worldwide, together with their fine particulates, could save some 700,000 lives annually by 2020. While four out of five of these saved lives would be in developing countries, the number in developed countries such as the United States would equal the number of projected deaths from traffic injuries or infection by HIV. This analysis does not take account of health benefits through avoidance of illness and lost workdays, nor does it consider deaths associated with pollutants other than particulates.
Because of these fine particulates, urban residents in China will, under a business-as-usual scenario, face health costs rising from $32 billion (or $129 per resident exposed) in 1995 to almost $98 billion (or $197 per resident) in 2020; these costs include 600,000 premature deaths, 5.5 million cases of chronic bronchitis, more than 5 billion restricted-activity days, and 20 million cases of respiratory illness each year. When adjusted to the projected increases in income, the costs in 2020 will total more than $390 billion, or 13 percent of China's GDP.
By far the biggest environmental externality is, or rather will be, global warming. There seems little doubt that it is indeed on its way, if not already arriving, and that it is due in major measure to fossil-fuel emissions, not just carbon dioxide but also methane and nitrous oxide. Uncertainties lie in the speed of its onset and its regional manifestations. Nor is there much doubt about the scale (though not the size) of its economic costs, at least as minimally reckoned in trillions of dollars in the long run. Regrettably, no estimate can be advanced here, not even in the form of a range, as to the size of ultimate costs of global warming beyond preliminary assertions that it could eventually cost the United States at least 1-2 percentage points of GDP. Extrapolated to the rest of the world, this means that the total cost could readily reach $1 trillion per year and probably much more (supposing, of course, that there is no rapid phase-out of fossil fuels forthwith). Suffice it to say here that global warming is far and away the greatest environmental problem we can expect within the foreseeable future. From this standpoint, let alone other pollution effects, all use of fossil fuels is here regarded as environmentally adverse to a significant extent. But because of lack of solid estimates of costs and insofar as this will be a cost in the mid- to long-term future, the hidden subsidy levied on our descendants is left out of further consideration. ...Global warming could cost the world $1 trillion per year. It is far and away the greatest environmental problem we can expect within the foreseeable future.
Despite these many instances of environmental externalities stemming from fossil fuels (let alone nuclear energy), there is no way to come up with a quantified estimate of all environmental externalities in the fossil-fuel sphere. But several items are certainly indicative: annual health costs from air pollution in Indonesia, $0.5 billion, and in India, $1.7 billion; health costs from acid rain in the United States, $12-$40 billion (say $20 billion), and in Britain, $29 billion; timber losses from acid rain in Europe, $30 billion; agricultural costs from air pollution in four European countries, $10.7 billion; health costs in China, $32 billion; acid haze damages in China, $14 billion; and cost of lives lost to particulate pollution in the United States, $240 billion. Let us exclude the last item, valid though it is in itself; if we considered all such premature deaths in the developed countries, that item alone would approach, if not exceed, $1 trillion, making it an extreme "outlier." The other items total $138 billion.
The calculation of these other items is limited to a degree. For instance, they cover only three developing countries and almost entirely with respect to health costs. They cover only four European countries with respect only to agricultural costs, and they cover Europe as a whole with respect to acid rain damage only to timber supplies. So a reasonable estimate, albeit very rough and ready, for all environmental externalities worldwide surely runs to several hundred billion dollars. Conversely, not all the pollutants stem from fossil fuels, just the majority. The reader will readily think of various other qualifications. In order to come up with an estimate of some order, the authors postulate a total of $200 billion per year. Preliminary and exploratory (even speculative) as this is, it is more realistic than to say we cannot quantify these externalities in worthwhile fashion at all and hence imply that their value is nil.
Click here to read "Bush Misunderstands the Marketplace," the first excerpt from Perverse Subsidies.
This story is protected by copyright and cannot be reprinted without the permission of the author.
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