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External Costs of Transporting Petroleum Products: Evidence from Shipments of Crude Oil from North Dakota by Pipelines and Rail

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Using data for crude oil transported out of North Dakota in 2014, this paper constructs new estimates of the air pollution, greenhouse gas, and spill and accident costs from long-distance movement of petroleum products by rail and pipelines. Our analysis has three main findings. First, air pollution and greenhouse gas costs are nearly twice as large for rail as for pipelines. Second, air pollution and greenhouse gas costs are much larger than estimates of spill and accidents costs. Third, air pollution and greenhouse gas costs of transporting fuel by rail and pipelines are one-fifth to one-tenth of the costs of combusting fuel in motor vehicles. These results suggest that the policy debate surrounding crude oil transportation may be putting too much relative weight on spills and accidents, while overlooking a far more serious external cost: air pollution and greenhouse gas emissions.

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Energy Specializations: Petroleum – Pipelines; Petroleum – Land and Water Transport; Energy and the Environment

JEL Codes:
N5 -
Q3 -
Q51 - Valuation of Environmental Effects

Keywords: Crude oil, Air pollution, Greenhouse gases, Railroads, Pipelines

DOI: 10.5547/01956574.40.1.kcla

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Published in Volume 40, Number 1 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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