|  | | Full Cost Accounting of Renewable and Conventional Energy Sources
Amount: $673,995
Leads: Steve
Polasky, Professor - Department of Applied Economics, David Tilman,
Regents Professor - Ecology/Evolution/Behavior, Vernon Eidman -
Department of Applied Economics, Frank Kulacki - Mechanical Engineering
and Jennifer Kuzma - Hubert H. Humphrey Institute of Public Affairs,
Doug Tiffany - Department of Applied Economics
Benefits and Deliverables:
- Set
out a clear methodology for full cost accounting of energy use that
includes environmental costs along with direct costs of energy use;
- Apply
full cost accounting to a range of alternative renewable and
conventional energy sources to make an objective comparison of the full
costs of alternative energy sources.
Description:
Many alternative sources of energy are technologically feasible, but whether they are economically and environmentally desirable requires consideration of the full cost of their production and use. Energy users pay market prices that reflect the direct costs of production, transportation and storage of the energy they use. However, energy prices typically do not account for environmental costs and therefore do not reflect the full cost of energy production and consumption.
Energy and environment are intertwined. Environmental costs from energy use include human health and welfare impacts caused by air and water pollution, solid waste, climate change, and ecological changes from changes in land use and nutrient cycles. Fossil fuels, which are the dominant source of energy at present, are a major contributor to a range of environmental problems from local air pollution to global climate change. Some environmental costs, such as production of nitrous oxides (NOx), are associated with high-temperature combustion of both fossil and renewable fuels. Other costs, such as the loss of biodiversity and ecosystem services caused by increased land dedicated to biomass production (and possibly from energy, fertilizer and pesticide inputs) are uniquely associated with particular fuels. When environmental costs are not incorporated into energy prices, choices are skewed towards energy sources with low market price even though these sources may have higher full cost than alternatives.
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