Executive Summary
America is at an energy crossroad. As a nation, we are dependent on
fossil fuels at a time of growing demand and dwindling supply.
Meanwhile, fossil fuel use continues to impose massive environmental and
economic costs. Now our country must choose between paying to continue
the status quo and investing in a new energy future.
The costs of continuing on our current energy path are steep.
American consumers and businesses already 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. If America continues along a business-as-usual
energy path, U.S. fossil fuel spending is likely to grow, 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 reverse is true. The United States cannot afford to wait
to break our dependence on fossil fuels. 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. Each year, more than 70
percent of this money is spent on oil.
- 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 looming environmental and
human catastrophe, could inflict massive economic damage as well:
- 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.
- A 2007 study by researchers at the Lawrence Livermore
National Laboratory and the Carnegie Institution at Stanford
University 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 and global
corn growers lost $1.2 billion in 2002.
- Global warming is forecast to inflict a variety of other
costs, including declining rainfalls and rising temperatures
that will combine to cause large and extended drought conditions
in regions like the Southwest, and impacts on public health due
to heat-related illnesses, greater formation of ozone smog, and
increases in vector-borne disease.
- 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.
- 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.
- 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
resulted in the expenditure of between $860 million and $1.1
billion in removal costs and compensation for damages.
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 – an amount
equivalent to three years’ worth of income for the entire American
workforce at current earning rates.
- Fossil fuel expenditures will decline in the next several years
due to the lingering effects of the economic recession, but annual
expenditures of more than $1 trillion per year – which proved
devastating to the economy during early 2008 – will become the “new
normal” by the middle of the next decade. By 2030, the United States
can expect to spend approximately $360 billion more per year on
fossil fuels than we did in 2006.
- If fossil fuel prices are driven higher, faster, 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.
- Oil prices are a main driver of higher expenditures. If oil
prices reach $200 per barrel by 2030 – an event more likely to
happen as world oil supplies become increasingly strained – the
United States will be spending $1.3 trillion out of $1.6 trillion
total fossil fuel costs on oil alone.
- 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 A 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 reduce its emissions of global warming pollution by
approximately 1.2 billion metric tons of carbon dioxide per year
(equal to about 20 percent of today’s fossil fuel emissions) with
net dollars savings. In other words, these investments are economic
winners on their own terms – even excluding benefits for the
environment, public health and America’s security..
- A recent Energy Information Administration analysis of the
American Recovery and Reinvestment 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
deeply enough to prevent dangerous impacts from global warming,
guided by the latest scientific understanding. The United States
should adopt an emissions cap and other policies that will reduce
global warming pollution by 35 percent 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. One hundred 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 fuel industries.
Environment America
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Federal Advocacy Office: 218 D Street SE, Washington, DC 20003
E-mail:
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