Thursday, October 13, 2011

Negative externality and true cost of carbon-based energy

Natural Gas Damage Larger Than Its Value Added For Even Low CO2 Prices
Coal does more harm than good.

Okay, public health experts have known this for a while — see Life-cycle study [Epstein et al]:Accounting for total harm from coal would add “close to 17.8¢/kWh of electricity generated.”

But now we have some of the leading (center-right) economists in the country — Nicholas Z. Muller, Robert Mendelsohn, and William Nordhaus — making this case in a top economic journal, the American Economic Review. Their article, “Environmental Accounting for Pollution in the United States Economy” [akaMMN11], models the impact 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.

Nobel Prize-winning economist Paul Krugman summarizes the core conclusions in his post, “Markets Can Be Very, Very Wrong.”

"Consumers are paying much too low a price for coal-generated electricity, because the price they pay does not take account of the very large external costs associated with generation. If consumers did have to pay the full cost, they would use much less electricity from coal — maybe none, but that would depend on the alternatives.

"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...."

No comments: