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
spends 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 are 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 beside 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 nearly 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 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.
