Environmentally Responsible Energy Pricing*

Abstract

This paper assesses the value of the non-global warming externalities associated with energy use. The estimates of the full social cost energy prices based on this “no regrets” approach imply environmental costs that often greatly exceed current tax amounts. The midpoint estimates suggest that the price of coal is most out of line with its efficient level. Natural gas is currently overtaxed, and gasoline is appropriately taxed. There is also a substantial range of uncertainty embodied in the no regrets estimates.