Expert Report

Each report is produced by a committee of experts selected by the Academy to address a particular statement of task and is subject to a rigorous, independent peer review; while the reports represent views of the committee, they also are endorsed by the Academy. Learn more on our expert consensus reports.

The benefits to society of energy production and use are well-known, but energy also has many adverse effects not reflected in market prices, such as the damage air pollution imposes on human health and the environment. This congressionally-requested report from the National Research Council, Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use, examines those "hidden costs" in an effort to inform energy-related policy decisions. The damages that the committee was able to quantify were an estimated $120 billion in the United States in 2005, a number that reflects damages from air pollution associated with electricity generation relying on fossil fuels, motor vehicle transportation, and heat generation. The report also considers other effects that are not included in the figure, such as damages from climate change, harm to ecosystems, effects of some air pollutants such as mercury, and risks to national security.

Key Messages

  • Coal-fired electricity plants generated the most damages; average damages associated with coal-fired plants per kilowatt-hour were 20 times higher than the average damages associated with natural gas fired plants per kilowatt-hour.
  • Corn ethanol was estimated to produce some of the highest non-climate damages in 2005 because the production and conversion of corn into fuel is energy-intensive.
  • Hidden costs of damages in 2005 amounted to more than $120 billion dollars, including those associated with pollution's effect on human health, crops, timber yields, and other areas; because there were many areas where it was not possible to quantify damages, the true external costs are likely to be far higher than this figure.
  • Highway vehicles -- considering energy production and use over the lifecycles of vehicles and fuels -- caused $56 billion in health and other non-climate damages, with $36 billion from light-duty vehicles and $20 billion from heavy-duty vehicles.
  • However, further reducing energy's non-climate damages in a significant way will require new technological breakthroughs, especially in transportation.
  • In 2005, non-climate damages from coal plants amounted to $62 billion; non-climate damages from natural gas plants amounted to $740 million.
  • Most of the vehicle-fuel combinations produced relatively similar damages, although the relative contribution of damages from the vehicles' and fuels' lifecycles varied.
  • Plug-in electric vehicles were estimated to produce some of the highest damages, largely because they rely on fossil-fuel based electricity.
  • Regulations that are currently in place and will be carried out in the future, including light-duty fuel economy standards, are expected to reduce non-climate damages by 2030.
  • The "worst" (most damaging) 20 percent of coal plants produced 63 percent of the total non-climate damages from coal plants. On the other hand, the less-damaging 50 percent of coal plants produced only 12 percent of that $62 billion.
  • The committee could not assign climate-related damages a specific dollar value, but estimated future damages from climate change could potentially more than double the $120 billion figure.
  • The emissions from driving a vehicle accounted for only one-quarter to one-third of the total damages related to vehicles; the majority of damages -- two-thirds to three-quarters -- result from the manufacturing of the vehicle and production of the fuel for it.
  • The most damaging 10% of natural gas plants caused 65 percent of the aggregate damages.