US society picks up unpaid $1.7 trillion tab from energy industry every year, new research reveals

University of Sussex

An oil refinery operating at night

The US energy sector generates more than $1.745 trillion of additional unaccounted costs every year, new research from the University of Sussex Business School and Hanyang University reveals.

The true social, environmental and health costs of the US energy sector dwarves the entire revenues of the country’s electricity industry ($390 billion) and its upstream oil and gas industry ($181 billion), the research reveals.

The oil industry is the US’s biggest contributor of energy externalities creating $787.8 billion of additional costs, Professor Benjamin K Sovacool of the University of Sussex Business School and Professor Jinsoo Kim of Hanyang University have calculated.

The authors said these huge costs brought about by the sector’s contribution to climate change, air pollution and land degradation are not met by oil producers or consumers but instead paid for by society at large.

The newly published research also reveals the hidden annual costs of the US’s coal industry total $516.96 billion, $265.6 billion for natural gas, $87 billion for nuclear and $87.08 billion for all renewable energy sources.

Benjamin K. Sovacool, Professor of Energy Policy in the Science Policy Research Unit (SPRU) at the University of Sussex Business School, said:

“These figures for the costs of externalities within the United States are frankly amazing: they amount annually to more than the entire revenues from the electricity industry, or the national oil and gas industry.

“By my calculation, the Apollo program’s total cost was about $25.4 billion, or about $152 billion in today’s money. That means every year the cost of American externalities is more than the expense of ten Apollo programs.”

Professor Jinsoo Kim, from the Department of Earth Resources and Environmental Engineering at Hanyang University, said:

“Our findings from reviewing 11 externalities, including climate change and air pollution, makes clear the need for daring energy policies from the incoming Biden administration to resolve a huge imbalance in the US energy sector.

“The energy policy of the Biden administration will be very different from his predecessor whose policies have helped to significantly increase externalities from oil and natural gas – in sharp contrast to other high-income economies such as the UK over the same period.

“Biden’s vision of the Clean Energy Revolution has ambitious goals for decarbonization and he has already declared that he will not be a friend of the fossil fuel industries but cutting off those industries’ subsidies is not enough to make an evident change.

“It will be a challenging journey to ban fracking and reduce hydrocarbons dramatically within his first term but a good start for the Biden administration would be to develop an exit plan for coal and set rigorous fuel economy standards.”

The research, published in Energy Research & Social Science, carried out a meta-analysis and synthesis of 139 studies containing 704 distinct estimates of externalities to find the range and scope of externalities, e.g. the unexpected costs or benefits resulting from economic activity that affects people other than those engaged in that activity for which there’s no proper compensation, associated with electricity supply, energy efficiency, and transport.

The academics then calculated the annual cost to the US by taking the extra cost associated with each energy source and multiplying it by its projected total supply for one year.

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