EPA researchers suggest US electricity consumers should be willing to pay 2-4x for emission-free alternatives to fossil fuel electricity due to health impacts
US consumers of electricity should be willing to pay, on average, $0.24–$0.45/kWh—approximately 2–4 times current retail costs—for emission-free alternatives to fossil fuel electricity due to the cost of health impacts from fossil fuel electricity, according to a new analysis by a pair of researchers at the US Environmental Protection Agency (EPA) Clean Energy and Climate Change Office, Region 9.
(According to the US Energy Information Administration (EIA), the US average retail price of electricity to the end consumer in the US in October 2012 was $0.1192/kWh, ranging from a low of $0.0835/kWh in Louisiana to a high of $0.3742/kWh in Hawaii.)
In a paper in press in the journal Environment International, Ben Machol and Sarah Rizk quantify the economic value of health impacts associated with PM2.5 and PM2.5 precursors (NOx and SO2) on a per kilowatt hour basis. They provide figures based on state electricity profiles, national averages and fossil fuel type.
Fossil fuel energy has several externalities not accounted for in the retail price, including associated adverse human health impacts, future costs from climate change, and other environmental damages.
...We find that the economic value of improved human health associated with avoiding emissions from fossil fuel electricity in the United States ranges from a low of $0.005–$0.013/kWh in California to a high of $0.41–$1.01/kWh in Maryland. When accounting for the adverse health impacts of imported electricity, the California figure increases to $0.03–$0.07/kWh. Nationally, the average economic value of health impacts associated with fossil fuel usage is $0.14–$0.35/kWh. For coal, oil, and natural gas, respectively, associated economic values of health impacts are $0.19–$0.45/kWh, $0.08–$0.19/kWh, and $0.01–$0.02/kWh. For coal and oil, these costs are larger than the typical retail price of electricity, demonstrating the magnitude of the externality.
When the economic value of health impacts resulting from air emissions is considered, our analysis suggests that on average, US consumers of electricity should be willing to pay $0.24–$0.45/kWh for alternatives such as energy efficiency investments or emission-free renewable sources that avoid fossil fuel combustion. The economic value of health impacts is approximately an order of magnitude larger than estimates of the social cost of carbon for fossil fuel electricity. In total, we estimate that the economic value of health impacts from fossil fuel electricity in the United States is $361.7–886.5 billion annually, representing 2.5–6.0% of the national GDP.—Machol and Rizk
Ben Machol, Sarah Rizk (2012) Economic value of US fossil fuel electricity health impacts, Environment International doi: 10.1016/j.envint.2012.03.003