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A Hot Mess

The US government reports that each kilowatt-hour of electricity generated in the United States using coal as a fuel source releases about 2.1 pounds of carbon dioxide (that’s 2000 data, presumably coal is cleaner today). If you examine the 4th IPCC Assessment Report (i.e. the “consensus” scientific report) you will find that each metric ton (about 2,205 pounds) of carbon dioxide emitted causes an estimated $30 worth of damage. Others estimate larger numbers while others estimate smaller ones. I’ve seen some recent estimates put that number at $43, and I’ve even seen some numbers put it at a negative number for small increases in CO2.

If this is accurate, then how much damage do I do to the world when I use one kilowatt of electricity for one hour in my home, when that electricity is generated by burning coal?  If each hour of electricity produces 2.1 pounds of carbon dioxide, this is the same as 2.1/2205 = 0.00095 tons of carbon dioxide. We know that each ton of carbon dioxide imposes $30 of costs, so this small amount imposes about 2.85 cents of damage.

I just had a student write a paper on the capitalized costs of generating a kilowatt-hour of electricity using home-based solar panels. In that paper he found that the unsubsidized cost of generating this power is about 26 cents per kilowatt-hour in New Jersey. The current cost of generating electricity in New Jersey using conventional fuels is roughly 9 cents per kilowatt hour.

Environmental economics tells us that the “true cost” of producing a good is the marginal cost of the labor, capital and profits embedded in the production of that good PLUS the external costs imposed on others from the production of that good. In the case of New Jersey electricity, the full cost of producing electricity using conventional fuels is 9 cents per kilowatt hour plus the 2.85 cents of external costs, for a total of about 12 cents per kilowatt hour. In other words, solar power, at current technologies, still costs 14 cents more than electricity generation using fossil fuels inclusive of the environmental costs of the power generation.

A few  points to consider:

  1. The above calculation is assuming that the production of electricity using solar panels has zero environmental impact, i.e. no negative externalities. This claim is hard to believe. Of course, life-cycle analysis as done by ecologists would uncover the full costs of both conventional and solar power, all I was writing about above are the CO2 costs from emissions at the “tailpipe.”
  2. Good economic and environmental policy only recommends, at most , a 2.85 cent subsidy to solar power per kilowatt-hour of electricity generated.  Right now, the subsidies are closer to the 15 cent range. There is simply no justification, economically or environmentally, for spending 15 cents to “save” 2.85 cents worth of damage. In other words, the current level of solar subsidies are destroying about 12 cents of resources for every single kilowatt-hour of electricity generated from solar.
  3. Even if the current level of subsidy was “efficient” policy requires that as the cost of solar continues to fall those subsidies should be removed. Who wants to bet me at even odds that this will ever happen?
  4. If research were to demonstrate that higher CO2 concentrations in the atmosphere were to result in net benefits to humanity, who would consistently support a policy of subsidies for fossil fuel burning and taxes on “cleaner” fuel sources? (again, ignoring other environmental factors and focusing only on CO2). If not, why not? I don’t think I am willing to entertain any environmental policy unless the answer to (4) was affirmative. Note that if such scientific evidence were forthcoming I would NOT advocate doing anything, I only ask this question as a matter of policy consistency on the part of the environmental do-gooders.

5 Responses to “A Hot Mess”

  1. Michael says:

    Hey Wintercow,
    For my own curiosity, and that it’s related to what I do, could you send me a list, if it is possible, of the subsidies to electricity?

    Speaking of net positive effects of burning coal, though, I’ve been told (by a source I consider very reliable) that farmers are now having to add sulfer to their fields. Before, they used to get enough just being downwind, but the EPA is requiring the plants to clean up even more.

  2. Harry says:

    One wonders how the IPCC arrived at $0.0285 per metric ton of damage. I’m not sure there is a scientist living who could comprehend all the variables and assumptions that went into arriving at that figure, which interestingly is expressed in dollars per metric ton, to four decimal points. Is that a net number, factoring in CO2’s beneficial effects on plant life, and how does one measure that?

    On Michael’s question, I have never heard of any farmer getting a soil test for sulfur. That does not mean that somebody somewhere is concerned about that, but is not a concern, unless you are a Texas cotton farmer. pH is important, though.

  3. Harry says:

    But your point is made, even if CO2 is an insidious costly pollutant and that the man-made variety has any measurable effect on the climate.

    With all this money at stake, I worry about the UN trying to get control over the Animal and Plant Kingdoms.

    Did I hear Van Jones say the other day that the environment has rights? That includes inanimate objects, but excludes, I assume everything beyond Earth. This is just what we need.

  4. Harry says:

    While we are at it, CO2 is what you get from burning anything, including coal, or any hydrocarbon, including what we human animals do. Nature produces a lot of it. CO2 is a trace gas, but does compose part of our atmosphere, which is largely N2, and O2. When lightning strikes in a forest, vegetation burns — nature’s broken window.

    It is public relations to talk about a ton or two of CO2, as if it were trash destined for a landfill, very dramatic, with the scientific guise of metric tons, as if that distinction means anything. This is demagoguery against the use of energy, especially in the land of the free.

  5. Michael says:

    Hey Harry,
    I don’t know if you read old posts, but I had to look it up.
    “The reduction in sulfur emissions brought about by the clean air act means that these same rainfall events are not replacing the sulfur leached.” http://www.ces.ncsu.edu/plymouth/cropsci/docs/sulfur.html

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