Coal’s Hidden Costs Make it Anything but Cheap

Part I of a three-part series on U.S. energy policy and student activism

On Friday, more than 10,000 students from universities and colleges across the United States will converge in Washington, D.C., for Power Shift, a four-day conference and lobbying effort geared toward climate change solutions.

These future leaders are more prepared than ever to engage their representatives and senators and communicate a message of hope and informed engagement for a green economy.

They'll come armed with climate research and energy reports, including an energy cost-effectiveness study published by the Associated Students Environmental Affairs Board of UC Santa Barbara. Written by myself and Nicholas Allen, US Electricity Policy 2009 documents important market trends and hidden costs within the U.S. electricity sector. It provides a valuable synthesis of information and a solid basis for engaging policy makers.

The largest contributor to the U.S. electricity supply, the coal sector, is the focus of this first of three articles looking at the energy concerns students will be talking about on Capitol Hill.

Lawmakers, listen up.

Hidden Costs

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 pop up in unexpected ways, and for coal, those hidden costs aren’t cheap.

The important question that students will be asking Washington lawmakers at Power Shift, and that those lawmakers should be asking the power industry and themselves, is: What are the hidden costs of coal-fired electricity, and are they worth it?

Our research turned up a number of startling and compelling insights, the most important of which can be put into three 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), as well as 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 externalities 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 wind and solar don’t have external costs that are nearly as high, a holistic look at energy options makes them more preferable than coal.

“Clean Coal”