Hiding the Costs of Coal

In light of current economic trends, many might consider foregoing environmental considerations in favor of cheap energy alternatives such as coal. But a closer look at the picture reveals a great deal of concerns.

Coal-fired electricity seems inexpensive – end-user rates average 5.3 cents per kWh, 40% less than the average price for power. But the immediate price of a product doesn’t always account for hidden costs that show up in unexpected ways. The important question that lawmakers should be asking the power industry, and themselves, is: What are the hidden costs of coal-fired electricity, and are they worth it? For coal, those hidden costs aren’t cheap.

Hidden or “external” costs come in three main categories: social harms, subsidies and environmental degradation.

Regarding social harms, people are well aware that air pollution from coal-firing harms humans and damages property, but they may not be aware of how much money that damage is actually costing them.

Princeton University Professor Robert Williams estimated the external cost of air pollution from coal-fired electricity using methodology established by the European Commission’s “ExternE” project. The result? The average U.S. coal plant creates about 13.5 cents of “harm” for every kWh it produces.

This harm comes about by damages to crops and buildings (acid rain), but mostly in the form of health implications for humans (sulfur dioxide, nitrogen oxides, particulate matter). Given that coal plants produced 1.99 terawatt-hours of electricity in 2006, the mean external harm for that year was $268 billion. Until coal-fired plants clean up or get phased out, we can expect coal to cost the U.S. economy about that much in the form of a public health burden every year.

The coal sector is also a highly subsidized industry. A 2007 study by the Organization for Economic Cooperation and Development (OECD) estimates that the coal industry receives about $8 billion per year in federal subsidies.

In addition to subsidies and general harms from air pollution, the added environmental risks of coal mining and ash waste disposal present another serious problem. The Department of Energy estimated that regulating coal ash as a “toxic waste” would result in $11 billion per year for tighter controls. Of course, as the recent Tennessee Valley Authority Coal Ash spill reveals, coal ash is in fact a toxic waste, even if it is not currently regulated as such.

These hidden costs don’t show up on our utility bills, but they trickle down to all of us in the form of higher insurance rates, medical costs, lost productivity, ash spills, and of course higher taxes.

To the extent that renewables don’t have external costs that are nearly as high, a holistic economic look at energy options makes them more preferable than coal.

Recent talk might lead us to discussion of “clean coal.” Coal supporters say clean coal technology will mitigate carbon emissions and, in some cases, the overall pollution effects burning coal. Of course, it’s important to recognize that much of this technology is still in the research and development phase, and that it has little to do with problems related to dangerous mining and ash disposal.

Another problem is that industry has been reluctant to talk about the actual costs of these technologies. In 2008 the Government Accountability Office pointed out that retrofitting existing coal plants for 90% carbon storage would increase the cost of electricity by 7 cents per kWh, more than doubling the cost of coal. Less problematic are new Integrated Gasification Combine Cycle (IGCC) coal plants, which would require “only” a 35% increase in electricity costs.

Even ignoring cost increases with IGCC, the GAO points out that reliability of these plants remains a “continuing area of concern.” In line with this is the Electric Power Research Institute’s evaluation of IGCC, which estimates that the technology will take as long as 15 years to go from starting a pilot plant to proving the technology will work. Real viability of the most promising coal technology is still more than a decade away at best.

The end of coal is nigh. The alternative energy market says it, our health bills say it, and so do both sides of the aisle that are concerned with spending.

QUENTIN GEE is a PhD Student in the Department of Philosophy at University of California at Santa Barbara and a board member of The Coastal Fund. He can be reached at: gee@umail.ucsb.edu.