Accounting for The Harm of Coal

Much of the effort to rollback current EPA regulations focuses on coal-fired electrical power plants.  An article in the August issues of the American Economic Review sheds light on the issues at stake.  “Environmental Accounting for Pollution in the United States Economy” is an effort to assess the damages caused by various polluting activities.

The findings show that, contrary to current political mythology, coal is underregulated.  On average, the harm produced by burning the coal is over twice as high as the market price of the electricity.  In other words, some of the electricity production would flunk a cost-benefit analysis. This means that we’re either not using enough pollution controls or we’re just overusing coal as a fuel.  Here’s a bit of a shocker: “Coal plants are responsible for more than one-fourth of GED [gross external damages] from the entire US economy.”

This harm is mostly in the form of increased mortality  from sulfur dioxide and to a lesser extent nitrogen oxides and fine particulates.  In particular, coal plants produce about $53 billion in damages a year.  This estimate does not include climate change and uses a conservative estimate of health risks.

It seems unlikely that the study’s findings are exaggerated. The American Economic Review is probably the most prestigious academic journal in economics.  The authors of the include Robert Mendelsohn and William Nordhaus, whose work on climate economics I’ve followed.  In the area of climate economics, Mendelsohn and Nordhaus are considered to be centrist if not a bit conservative; they aren’t beloved of environmentalists.  Finally, the work that went into study included computer modeling for emissions of six pollutants from ten thousand different U.S. sources.

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Reader Comments

19 Replies to “Accounting for The Harm of Coal”

  1. “This estimate does not include climate change and uses a conservative estimate of health risks.”

    So, the study documents that coal power damaging the economy (by damaging human health and killing people), it likely underestimates the impacts on human health/longevity, it doesn’t measure economic damage due to degradation/destruction of natural resources, and it doesn’t consider the practically immeasurable negative impacts of climate change – and it doesn’t include the value people place on their own health/lives, and that of their loved ones.

    But, based on this study alone at face value, it seems there’s an economic argument to be made that investing in energy efficiency and transition to 100% (or as close as possible) renewable energy and electric vehicles will be cost-productive in economic terms.

    Seems like legal arguments could be made as well, to compel this transition.

  2. I am puzzled by how the study found that SO2 accounts for the bulk of damages from coal-fired electricity generation. Fine particulates account for the bulk of premature deaths from pollution from coal-fired power plants, and even using a low figure for the value of a statistical life, is usually found to account for the bulk of damages from coal-fired generation. The Laden et al study is a recent and credible study, but I suspect that the authors are taking the most credible lower-end estimates from Laden and calling that the best estimate. Dan is being a bit too generous when he says that at least two of the authors — Mendelson and Nordhaus — are not loved by environmentalists.

  3. The explanation, I think, is that sulfur dioxide does much of its damage by being transforrmed into fine particulate matter as it drifts downwind. As both of you say, fine particulate matter inflicts tremendous health costs.

    Craig Oren

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Dan Farber

Dan Farber has written and taught on environmental and constitutional law as well as about contracts, jurisprudence and legislation. Currently at Berkeley Law, he has al…

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