The true cost of gasoline is really $6.25 per gallon

Drew Shindell is a professor at Duke University in North Carolina. A while back, he thought it would be interesting to put a price on all the pollutants that get released into the atmosphere when we burn fossil fuels.

So he tabulated what he calls “climate damages” for a whole range of greenhouse gases like CO2, aerosols, methane and nitrous oxides. He says once these damages are added up, the true cost of gasoline in the US is $6.25 a gallon. For diesel, the true price is a whopping $7.72 a gallon.

Shindell also applied his analysis to the yearly damages from power plants in the U.S. He found that climate damages from coal fired plants quadruple the current average price of 10 cents per kWh to 40 cents per kWh. For gas-fired plants, the price doubles from 7 cents to 17 cents per kWh.

“We’re thinking, it’s too expensive to switch to solar and wind because we’ll have to build new power lines, and we’ll have to pay money for this and that, but we forget that the current system is super, super expensive. A better sense of the real costs might help people realize what choices they’re actually making,” he said.

The total yearly emissions cost for transportation, electricity, and industrial combustion is between $330-970 billion. That wide spread depends on what you choose to use as  your discount rate – the relative value of money over the years and decades of climate change to come. But in any event, it’s a lot of money. Taking a middle course in the calculations amounts to half a trillion dollars in damages.

Let’s forget about money for a while and look at the impact atmospheric pollution has on health. “Air pollution in the United States sends about 150,000 people to the hospital every year and causes 180,000 non-fatal heart attacks,” Shindell says. Those illnesses drive up the cost of health care directly and have indirect costs for society in general due to lost work days and lowered productivity.

That’s assuming people actually recover from the effects of pollution on health. Shindell says its fatal effects are even higher globally. “Around the world air pollution is the single leading environmental cause of death,” he says. “It’s not necessarily that people pay out of their pockets, but they’re dead.”

Health costs affect us in the present but climate change will affect us in the future. What Shindell’s work allows us to do is to monetize current and future costs so we can better understand the connection between them. “What I’m trying to do is provide a basic, widely-generalizable metric where you can say, this is how much it costs per pound of any individual pollutant that’s emitted,” he says.

The political, economic and social consequences of pollution and climate change present complex problems but money is a language that everyone understands. If people can use money as the common denominator to understand the depth of the problems, it is more likely that effective solutions can be created. And that is what makes Shindell’s research so important.

Posted by Steve Hanley

Steve Hanley is a car nut and Formula One addict who occasionally drives his Mazda MX-5 on track at HPDE events. He has been known to drive to Nova Scotia just to see the lupins in bloom or to Watkins Glen for a weekend of historic racing. He writes about automobiles, technology and travel from his home in Rhode Island.

  1. I’m not going to disagree with Professor Shindell’s findings, but I do disagree with his data.

    If he is only considering damage to the environment, then he is not considering the true value of a gallon of fuel. It seems that he is not considering the cost of production, transportation, distribution, and the all important tax and production subsidies. It would be better to compare the price of a gallon of fuel in one country to a similar rule made by the same company in another country. I have read estimations as high as $10 per gallon are closer to accurate.


    1. Thanks for your comment, Steven. You make excellent points that further buttress his arguement, which is that renewables are more than cost competitive right now this very minute.

      I think most people who visit Ecomento are aware that fossil fuels cost far more than what we pay at the pump or the meter. 100 years ago, all the building in London were coated with black stains from years of burning soft coal.

      Today, the harm from burning fossil fuels is much greater but largely invisible to the average person. This study at least gives us a yardstick to measure the extent of that unseen damage.


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