Is It Costly to Transition from Fossil Fuel Energy: A Trade-Off Analysis

Abstract

This study aims to evaluate the trade-off between using cheaper and contaminated energy versus cleaner and more expensive energy and ultimately assess their combined effect on social externalities. We estimate the impact of air pollution and income level—mechanisms of energy consumption—on violent crimes and mortality rates. We propose an integrated causal analysis to address an endogeneity concern caused by the energy selection process by employing a difference-in-differences method (DiD) for the mechanism approach using policy changes. We explore the energy variations in neighboring counties caused by the implementation of green act policies to measure violent crimes and mortality rates using air pollution and income as the mechanisms. The results reveal that reducing fossil fuel by one terawatt hour can save 23 lives. Further, lowering nonrenewable energy use reduces 53 rapes yearly by lowering the maximum temperature, whereas decreasing fossil fuel does not negatively impact production and income. Thus, replacing fossil fuel energy with nuclear power is the most effective approach to reduce environmental and social damages caused by energy use.

Keywords

• difference if differences
• fossil fuel energy
• mechanism design
• social damage