Coal is not so cheap
A new economic analysis published in the highly prestigious American Economic Review has made a damming assessment of the costs of pollution from fossil fuel industries, and concludes that coal is doing more harm to the US economy than good – and that doesn't take into account its climate impact.
The paper by respected economists Nicholas Muller, Robert Mendelsohn (Yale) and William Nordhaus (Yale), models the physical and economic consequences of emissions of six major pollutants (sulfur dioxide, nitrogen oxides, volatile organic compounds, ammonia, fine particulate matter, and coarse particulate matter) from the country's 10,000 pollution sources. It is an update of a previous study concluded in 2009.
It concludes that the "gross external damages" (GED) from the sickness and death caused by the pollution, is larger than their value add in several key industries – coal- and oil-fired electricity plants, solid waste combustion, sewage treatment, stone quarrying, and marinas!
The most damning assessment is of coal, which is fingered for about $53 billion in damages a year. This estimate does not include climate change and uses a conservative estimate of health risks. The authors say that coal's damages bill ranges from 0.8 to 5.6 times value added.
Instead of being cheap and affordable, the study finds coal is likely the costliest source of electricity. Which is not to suggest that it immediately be shut down, they say, but that it should be understood that for every one-unit increase in output, the additional costs are higher than the revenues.
The paper is timely in the context of the US political debate, where the Republican right and business groups have been attacking the ability of the Environmental Protection Agency to regulate those emissions – which in the absence of a cap-and-trade scheme or a carbon tax is about the only method available to reduce greenhouse emissions. The EPA, and the White House, reasons that if you cut back on major pollutants, you can cut back on greenhouse emissions by default.
And it also puts an interesting perspective on any cost/benefit analysis. As New York Times columnist Paul Krugman noted in a column this week:
“At one level, this is all textbook economics. Externalities like pollution are one of the classic forms of market failure, and Econ 101 says that this failure should be remedied through pollution taxes or tradable emissions permits that get the price right.
“What Muller et al are doing is putting numbers to this basic proposition – and the numbers turn out to be big. So if you really believed in the logic of free markets, you’d be all in favour of pollution taxes, right?"
And then Krugman laughs, noting that today’s American right "doesn’t believe in externalities, or correcting market failures; it believes that there are no market failures, that capitalism unregulated is always right. Faced with evidence that market prices are in fact wrong, they simply attack the science."
Interestingly, the lobby groups seeking to limit the scope of the EPA’s power are now questioning the EPA’s assumptions on electricity reliability – a common theme in the debate about the future of coal-fired generation in Australia. The coalition’s petition contends the EPA is rushing to judgment and questions the EPA’s assumptions on electric reliability.
As another aside, Bloomberg’s monthly Markets Magazine, has an interesting and detailed insight into Koch Industries, the secretive US conglomerate controlled by the wealthy Koch brothers (each worth around $US20 billion), which has been underwriting the Tea Party campaigns, the fights against government regulation, as well as the work of many climate sceptics, denialists and delayists.
Here’s the conclusion of the Bloomberg article: “For six decades around the world, Koch Industries has blazed a path to riches – in part, by making illicit payments to win contracts, trading with a terrorist state, fixing prices, neglecting safety and ignoring environmental regulations. At the same time, Charles and David Koch have promoted a form of government that interferes less with company actions.” Bloomberg, remember, is a staid publication. It’s worth a read.
Follow @gilesparkinson on Twitter
Comments on this article
Kochies
The link to the Bloomberg article on the Koch brothers does not work, would be interesting.
Koch
try again, worked for me. Here is full link.
http://www.bloomberg.com/news/2011-10-02/koch-brothers-flout-law-getting...
Koch
Funny, I tried the link to the Bloomberg article on the Kock brothers and nothing.
Remove Coal Subsidies
Brian, you are so right. It truely beggars belief. The explaination has to be related to Lobbyists and just how totally corrupting they have become to common sense.
You would hope that one day politicians will realise that if look, sound and smell like a idiot, then the chances are you are one.
I don't always agree either
Iain. Yeah, I'm like you, but it's true that it is a good idea. John, if you're reading this again, throw some ideas at editor@climatespectator.com.au. would appreciate your input.
More Fruitful Approach
If only the Green Movement had followed this route to destroy fossil fuels instead of sacrificing their credibility on CAGW, they might well have had some success by now.
Remove coal subsidies
Why do the state and federal governments keep pouring money into this sector? The feds can get closer to a surplus by removing all coal subsidies which include free ports, rail lines, rolling stock, power grid extensions and tax breaks. Any money saved can be used to fudn the longer term health costs mentioned.
Brian
I do not always agree with
I do not always agree with everything that John Bennetts has to say but I do admire his lateral thinking. Giles, get John involved with the special edition on Externalities idea.
Two wrongs and a right
Its good to read an article about the many other reasons we should ween ourselves off coal. I wonder if it included the ticking time-bomb of methyl mercury accumulation in aquatic ecosystems, also partly attributed to coal fired power generation.
http://pubs.usgs.gov/fs/1995/fs216-95/
Seeing as though the study reportedly didn't look at climate impacts, I assume it didn't go into the possible offsetting influence of sulfur aerosols emitted by coal fired power stations reflecting sunlight.
True cost of coal fired power remains high and hidden!
Australia was “blessed” with having massive coal resources close to the surface and close to markets. It made coal fired power very attractive as new gas resources remained undiscovered. Governments were also the only operators of the electricity industry and Government owned the coal mines, infrastructure, power stations, distribution systems and retail industry. Cheap and plentiful electricity helped Australia to grow. In some ways the coal industry is like a grandfather taking out a loan to be repaid by his grandchildren. To rehabilitate coal mines requires huge amounts of money and there is still no clear indication how much damage coal dust has done to all the thousands of mine workers all over Australia. Many mines will come towards the end of their useful life and it is highly unlikely that all of these mines will be rehabilitated by their owners in a long term sustainable manner. The real cost of coal? How long is a string?
Who would wish for coal?
No one would wish for coal burning power, as there are now sustainable cleaner alternatives, except for those conditioned to the receiving of profits from it, while the costs accumulate to all.
Coal
The industrial revolution was mainly based on the use of coal as an energy source. The revolution was accompanied with a change in the nature of relationships between master and servant, the evolution of political structures, and the advance of both the Enlightenment and of democracy.The growth of warring industrial/military nation states tell us that not all changes were positive.
The changes in society that occurred because of that technical revolution should inform us that, as we now move towards new sources and use of energy, further evolution of society is inevitable and desireable. This time round we should be thinking far more in terms of sustainability than in terms of unregulated growth leading nowhere in particular. Our economics need to develop a central core of forward thinking and planning in order to avoid the kind of chaos that that first revolution brought in its wake.
What the world is experiencing as a "financial crisis" is really the effect of privileged sectors of society making futile attempts to resist social change that they see as threatening their wealth and power. Their attempts to resist social evolution result in the restriction of activity that is hidden under the term "austerity measures"
Our real need is for mental and spiritual adjustment to the new world technology offers. When those who regard themselves as upper echelons embrace change instead of resist it, when they accept the need for greater equality, the economics of business will right itself - and we will move on.
Coal Expensive ? Whats New ?
US Peak Coal is already with us. The energy content of coal per ton has fallen such that there is a significant increase in the number of trains required to deliver the coal.
They have picked the low hanging fruit and are now into the more expensive coal.
World peak coal estimates vary between this year and 2025 with most bets on the latter. Don't let our coal confuse you. The trouble is wind and solar are nowhere near ready to replace coal. Not unless you want to go to bed at sunset everynight by candlelight.
China is in the words of their Premier ready to burn all our coal.
How True
Yes, I did a masters thesis on the "externalities" of renewable energy in 2010 and US Reasearch (Associate Professor Benjamin Sovacool (Vermont Law School) in 2008 in a paper titled "Renewable Energy: Economically Sound, Politically Difficult" (The Electrical Journal 2008 at 24) which showed that the Nominal Levilised Cost of Energy Efficiency; Offshore Wind; Hydro; Biomass; Advanced Nuclear; Onshore Wind; Geothermal were the 7th cheapest energy source (without interalising the "external" carbon price) based on 2007 indicies.
@ Mike: when the facts change..
Mike you are very wrong. The costs of air pollution have been apparent for a long time, but only recently has the work been done to quantify the economic and health costs. And if the costs are greater than the benefits then you can hardly casually dismiss it.
In fact this recent publication ( and other such as as the "Full cost accounting for the life cycle of coal" - by Epstien Feb 2011 ) make a very compelling case that really confirms market faiure. Those who chose to defend ideology over science are essentially supporting "ideological failure" as well.
It is rather ironic, isn't it, that the "free-market" brigade who are often fond of quoting Keynes' saying " when the facts change I change my mind what do you do ..?" would appear to be doing the exact opposite.
Message diluted?
There are two subjects here, each worthy of a separate article.
The externalities of energy use, farming and fishing are certainly worthy topics. Those who adopt a cash flow attitude to the world (Dig it up and sell it, forget everything else) are anti-democratic and antisocial.
The Tea Party and attitudes associated with the extreme capitalists and right wing parties of the western world have much to answer for. Business Spectator could devote a special issue to income distribution, the principles of taxation and social equity.
How about a special edition of Climate Spectator devoted to externalities, what they are, and why they matter?
Coal not so cheap?
This is just wishful thinking and isn't going to get anyone anywhere.