Air Pollution Damages from Offshore Energy Production

Abstract

This analysis uses an integrated assessment model to link emissions from offshore oil and gas platforms in the Gulf of Mexico to impacts in the continental U.S. The analysis employs emission and production data for rigs located in the Gulf of Mexico to estimate the air pollution damages for the years 2000, 2005, and 2008. For platforms in the western Gulf of Mexico, extraction yields damage due to air pollution that average between $0.31 and $0.75 per unit of oil extracted. For platforms in the central Gulf of Mexico, damage due to air pollution averages between $0.26 and $0.57 per unit of oil extracted. The distribution of marginal social costs is right-skewed; the paper finds that in 2008 115 platforms produce damages in excess of $12.80 per barrel of oil. Optimal management of the air pollution emissions from platforms in the Gulf must recognize this spatial heterogeneity in damages.