America is at an energy crossroad. As the
result of our dependence on fossil fuels, we face the paradox of growing demand
and dwindling fossil fuel supply, and the problem of rising environmental and
economic costs. Now our country must choose between paying to uphold the status
quo and investing in a new direction.
In this
report, we calculate the massive current and future costs of America’s
dependence on fossil fuels. Today, U.S. consumers and businesses spend
roughly $700 billion to $1 trillion each year on coal, oil and natural gas, and
suffer the incalculable costs of pollution from fossil fuels through damage to
our health and environment. With business-as-usual, U.S. fossil fuel spending is likely
to grow in the near future, totaling an estimated $23 trillion between 2010 and
2030.
Policymakers
in Washington, D.C., and many states have recently taken
the first small steps toward a clean energy future, adopting policies to
encourage energy efficiency, ramp up the use of solar and wind power, and curb
global warming pollution. Now, with even bolder steps – such as a national cap
on global warming pollution and more ambitious targets for renewable energy and
energy efficiency – on the public agenda, powerful interests with a stake in
preserving the status quo have criticized strong clean energy policies as being
too expensive for the American public.
In fact,
the United States
cannot afford to wait. The cost of fossil fuels to our economy and our environment
will continue to mount in the years to come unless the nation takes bold steps
now to embrace the benefits of a clean energy future.
America is overly reliant on fossil
fuels such as coal, natural gas and oil. This dependence is costly to everyday
citizens, and sends valuable dollars overseas and out of the domestic economy.
·
The United
States depends on fossil fuels for 85
percent of our energy supply.
·
In 2006, American consumers and businesses spent $921
billion – or close to 7 percent of America’s gross
domestic product – on fossil fuels, more than the nation spent on education or
the military. In 2008, national expenditures on fossil fuels likely topped $1
trillion for the first time ever.
·
In 2007, America
spent more than $360 billion importing fossil fuels, with the vast majority of
that money spent on crude oil. That money is a direct transfer of wealth from
American consumers to oil companies and foreign governments.
·
For every dollar that an American household spends each
year, about 10 cents is likely to go toward the purchase of energy, with most
of that money spent on fossil fuels.
Fossil fuel production and use
damage our environment and our health – inflicting even greater damage on the
American economy and our quality of life.
·
Fossil fuel combustion is the leading contributor to global
warming, which, in addition to being a potential environmental and human
catastrophe, could inflict massive economic damage as well:
o
Sea level rise and an increase in the severity of storms
could put key cities such as New York, Miami and New
Orleans at greater risk of costly storm damage. A 2008
Natural Resources Defense Council study estimated that high-intensity
hurricanes could cause as much as $422 billion in damages in Atlantic and Gulf Coast
states between 2025 and 2100.
o
A 2007 study by researchers at the Lawrence Livermore
National Laboratory and the Carnegie Institution at StanfordUniversity
found that global production of three of the six largest global crops
experienced significant losses due to global warming between 1981 and 2002. The
study concluded that global wheat growers, for example, lost $2.6 billion in
2002, and global corn growers lost $1.2 billion in 2002.
o
Global warming is forecast to inflict a variety of other
costs, including declining water availability due to reduced mountain snowpack
in parts of the West, potential threats to parts of the timber industry due to
changes in forest composition, reduced opportunities for cold-weather
recreation, and impacts on public health due to heat-related illnesses, greater
formation of ozone smog, and increases in vector-borne disease.
o
An assessment by former World Bank Chief Economist Sir
Nicholas Stern indicates that global warming has the potential to reduce global
per-capita consumption by as much as 20 percent.
·
Fossil fuel production and use also imposes other
environmental and social costs besides those related to global warming.
o
Fossil fuels are a leading source of air and water
pollution. The economic cost of air pollution in sectors regulated under the
Clean Air Act has been estimated at $9 trillion between 1970 and 2000, with costs resulting from
pollution-induced early mortality, illness, health care costs and lost
productivity.
o
The production and transport of fossil fuels results in routine
pollution of the environment and occasional catastrophic accidents. The
December 2008 collapse of a coal ash pond outside a Tennessee Valley Authority
power plant covered 300 acres in sludge and will cost an estimated $825 million
to clean up. Between 1990 and 2006, 51 large oil spills in the United States
between 1990 and 2006 resulted in the expenditure of between $860 million and
$1.1 billion in removal costs and compensation for damages.
o
The money we spend on fossil fuels contributes to the
depletion of a precious and finite resource and often makes its way out of the
American economy to enrich businesses and governments far away.
The economic and environmental
burden of fossil fuel dependence will only worsen in the years to come.
·
The United States
will spend an estimated $23 trillion on fossil fuels between 2010 and 2030
should energy consumption and fossil fuel prices follow U.S. government
projections. As a point of reference, the United States GDP was just under $14
trillion in 2007.
Figure X. Projected U.S.
Expenditures on Fossil Fuels (2007 dollars) Reference Case
·
While fossil fuel expenditures will decline in the next
several years due to the lingering effects of the economic recession, annual
expenditures of more than $1 trillion per year will become the “new normal” in
the middle of the next decade. By 2030, the United States could be expected to
spend approximately $360 billion more
per year on fossil fuels than we did in 2006.
·
If fossil fuel prices are driven higher, faster -- as would
occur if world oil supplies become increasingly strained – the United States
could expect to spend more than $30 trillion on fossil fuels between 2010 and
2030. Fossil fuel expenditures would again surpass $1 trillion in 2011 and by
2030 we will be spending $750 billion more per year on fossil fuels than the
nation did in 2006.
·
Rising fossil fuel expenditures will affect all 50 states,
but states with a greater reliance on fossil fuels, particularly oil, will
experience greater increases. (See Appendix for projected fossil fuel
expenditures for all 50 states.)
Investing in clean energy that never
runs out can reap economic savings. The United States has the ability today
to produce this energy, and to help Americans use energy more efficiently in
their homes, businesses and vehicles.
·
A 2007 analysis by McKinsey & Company estimated that the
United States
could generate approximately 1.2 billion metric tons of carbon dioxide emission
reductions per year (equal to about 20% of today’s fossil fuel emissions) at negative marginal cost. In other words,
these are investments that will yield a positive return in strictly economic
terms over the lifetime of the investment.
·
A recent Energy Information Administration analysis of the
American Reinvestment and Recovery Act (ARRA) found that the Act’s provisions
for residential and commercial energy efficiency improvements will yield
significant savings. The EIA projects that the law will reduce residential and
commercial energy bills by $13 billion in 2020 and $21 billion in 2030.
·
The recent move by President Obama to increase federal
vehicle fuel economy standards to 35 miles per gallon by 2016 will deliver $20
billion in net savings to consumers in 2020 at gasoline prices of $2.25 per
gallon. If gasoline prices hit $4 per gallon, the net benefits would balloon to
$70 billion.
·
According to the Union of Concerned Scientists,
transitioning to a clean energy economy could cut global warming emissions
while saving consumers and businesses $465 billion each year by 2030, with $1.7
trillion in net cumulative savings between 2010 and 2030.
The federal government, along with
the states, should take actions to reduce our dependence on fossil fuels. They
should:
- Reduce the
nation’s emissions of global warming pollutants commensurate with the
reductions science tells us will be necessary to prevent dangerous impacts
from global warming. The United States should adopt an
emissions cap and other policies that will reduce global warming pollution
by 35% below 2005 levels by 2020 and by 80 percent below 2005 levels by
2050, and implement strict rules for carbon “offsets” to ensure that
efforts to reduce emissions are successful.
·
Ensure that a
cap-and-trade program used to achieve those targets directs the revenues gained
through the sale of allowances for public purposes. After a short
transition period, 100 percent of emission allowances should be auctioned, with
the revenues used for investments in clean energy and to benefit consumers.
·
Ensure that America
generates at least 25 percent of its electricity from renewable sources of
energy such as wind and solar power by 2025.
·
Strengthen energy
efficiency standards and codes for appliances and buildings, with the goal of
reducing energy consumption in new buildings by 50 percent by 2020 and ensuring
that all new buildings use zero net energy by 2030.
· Promote the development and implementation of clean
transportation infrastructure, including improving the fuel economy of
light- and heavy-duty vehicles, reducing the carbon intensity of transportation
fuels, and promoting plug-in vehicles, public transportation and high-speed
intercity rail.
·
Ramp up investment
in solar power through tax credits, specific targets in state renewable
electricity standards, requirements for “solar ready homes,” rebate programs,
and other measures.
·
End subsidies to
fossil fuels industries.
