Counting up the costs of coal

October 6, 2011 by Ken Ward Jr.

We had a little story in today’s Gazette about a new study that’s making the rounds of the environmental press. It’s by three economists (two from Yale and one from Middlebury College) and was published in the most recent edition of the respected journal American Economic Review. As we reported:

Air pollution from coal-fired power plants costs the U.S. more in health damage than those plants contribute to the American economy, according to a new study in a respected economics journal.

Coal plants produce the largest “gross external damages” — $53 billion annually — of any of the industries examined in the new study published in the latest issue of The American Economic Review.

The story continued:

According to the study, the gross external damages (GED) of coal-fired power plants cost about twice the annual value added to the economy by those facilities.

“Coal plants are responsible for more than one-fourth of the GED from the entire U.S. economy,” says the study. “The damages attributed to this industry are larger than the combined GED due to the three next most polluting industries: Crop production, $15 billion/year, livestock production, $15 billion/year, and construction of roadways and bridges, $13 billion/year.”

And:

If the potential costs of carbon dioxide pollution were included “the damages caused by oil- and coal-fired power plants are between 30 and 40 percent higher,” the study said.

“Although the damages from CO2 are large, they are not as large as GED,” the study said. “For the case of coal-fired power plants, CO2 causes an additional $15 billion in damages, which is relatively small compared to the GED of $53 billion.”

The study has gotten coverage from Treehugger.com, as well from Grist here and from Think Progress.  There’s also an interesting mention of it here from The Heritage Foundation.

Of course, there are some things that the activist media hasn’t really pointed out that this new study clearly says. For example, as we reported:

Study authors also cautioned that their estimates “are accounting measures and not measures of economic welfare.

“The economy has many existing distortions other than those from air pollution — such as taxes, distortions from market power, and other externalities — and existing accounts do not attempt to incorporate those,” the study said.

And:

The authors also said that, although damages exceed value added for some industries, “this does not necessarily imply that these industries should be shut down.

“On a formal level, it signifies that a one-unit increase in output of that industry has additional social costs that are higher than the incremental revenues,” the study said. “At an intuitive level, it indicates that the regulated levels of emissions from the industry are too high.”

What’s also not really clear is that this paper is in large part about methods. The authors are trying to find ways to have economic decisions fully account for environmental impacts like air pollution and public health effects of that air pollution.

And the methods available are still far from perfect. For example, this study measures “gross external damages” based on the impacts of emissions of six major pollutants: sulfur dioxide, nitrogen oxides, volatile organic compounds, ammonia, fine particulate matter and coarse particulate matter. It does not measure potential damage from other impacts of coal-fired power plants, like coal ash. And it certainly doesn’t provide a complete look at the costs and benefits of coal. Regular readers know that WVU’s Dr. Michael Hendryx has done work on that issue (subscription required), reporting that:

The human cost of the Appalachian coal mining economy outweighs its economic benefits.

But that study — as with all studies — was not perfect and didn’t include every aspect of coal’s impact on our lives.

The new American Economic Review paper is  a fascinating addition to the growing body of knowledge on these issues, and exposes how costly coal-burning plants are to the U.S. economy — costing far more than they provide in benefits:

“Coal plants are responsible for more than one-fourth of the GED from the entire U.S. economy,” says the study. “The damages attributed to this industry are larger than the combined GED due to the three next most polluting industries: Crop production, $15 billion/year, livestock production, $15 billion/year, and construction of roadways and bridges, $13 billion/year.”

One Response to “Counting up the costs of coal”

  1. Jim Sconyers says:

    And I expect that even if they had included CO2, it would only have been “gross external damage,” which would not account for the horrendous coming climate impacts of CO2 and other greenhouse gases.

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