Lest I be accused of being a shill for the coal sector, one ought to peruse my many previous comments on coal. Furthermore, I do not own any direct stake in any coal company aside from what my Vanguard mutual funds may be investing in. Furthermore, supporting coal is not good for my long-term career prospects. On the other hand, I DO own quite a large stake in whether coal remains a viable electricity generation source, since I care very deeply about having cheap, reliable, green and abundant energy supplies, as I understand that cheap and reliable energy has been an engine of massive welfare deliverance for humanity.
That said, I think the “externalities” case against coal needs to be reconsidered, and upon reflection it is almost astonishing that the best economists in the world have not articulated this. There are two lines of argument. The first one I have used before and will not rely on much at the moment. The argument goes something like this:
- producing, exchanging and using coal imposes (unpaid for) costs on third parties
- making coal producers, sellers and consumers feel the full costs of their actions improves welfare
- one way to do that is to tax activities that involve coal
Of course I am simplifying. But the rejoinder to this is (ignoring Coasean insights) – how much are coal-involved activities already being taxed? When we work up these “external cost” problems and solutions, the chalkboard assumption is that NONE of the stuff is being paid for already. But that’s clearly not the case. So the political implication is that if indeed there is a justification for carbon/coal penalties, they must be implemented at the margin – in other words, we don’t set a carbon tax at $30 per ton (that’s the expected damage from a ton emitted right now), but rather somewhat less, since there already is some tax placed on it. Now call me crazy for not expecting this insight to be widely shared.
Second, and a far more subtle, but I argue far more powerful point is this. Isn’t it possible, neigh, likely, that coal … is … green? This is of course preposterous. Serious economists, and I once in a while fancy myself one, have done all kinds of work demonstrating just how damaging coal, and other fossil-fuels are. Indeed, the American Economic Review (the “bible” of economics research) had a recent paper by William Nordhaus and colleagues recently published a paper articulating that the “externalities” from coal are so bad that in fact the production and use of coal does more damage than the good that it generates (as measured by value-added).
This study presents a framework to include environmental externalities into a system of national accounts. The paper estimates the air pollution damages for each industry in the United States. An integrated-assessment model quantifies the marginal damages of air pollution emissions for the US which are multiplied times the quantity of emissions by industry to compute gross damages. Solid waste combustion, sewage treatment, stone quarrying, marinas, and oil and coal-fired power plants have air pollution damages larger than their value added. The largest industrial contributor to external costs is coal-fired electric generation, whose damages range from 0.8 to 5.6 times value added.
Ignore the “integrated assessment model” – for it has lots of reasons to raise your ire. Accept these results on their face. Does anyone see the problem here?
Well, the problem is that doing the analysis this way is like sticking an emissions detector on the tailpipe of a bus and arguing that the emissions coming from that tailpipe cause X amount of lung disease, Y amount of global warming and Z amount of visible pollution, and so on. Which of course may be true. We don’t have to dispute that.
Does anyone see the problem?
Of course, the problem is that we have no idea if the bus is replacing something that might have been worse. Of course in the case of buses, even though emissions and damages from their tailpipes seem large in comparison to any one car, they are far lower, than the many cars in collection that they are replacing by being run. Perhaps incredibly, “green transportation” advocates absolutely are aware of this – it is precisely how they defend buses and perhaps other forms of “mass transit” over other forms of auto transit. Indeed, they would, rightfully, go ape-shit, if I wrote an article calling for banning buses because the CO2 emissions from buses were huge and that bus production and use generates lots and lots of particulate pollution and uses valuable energy resources.
So … what’s different about coal? We are talking about the economic damages from coal as compared to the energy generated in unicorn world, an energy that comes from powerful invisible pixies providing megawatt after megawatt of energy without us having to use any resources at all. Indeed, any serious energy analyst knows that no such free energy lunch exist. Indeed, not even the modern “green alternatives” can claim to be “very good” for the environment. In reality, where has all of this coal generation come from and what has it displaced? What were people using as energy sources in the UK, US and China prior to the coal explosions? Wood. And other “green” biomass. And not only are those materials FAR LESS energy dense than coal (meaning that even if coal production destroys mountaintops in West Virginia and digs great ditches in Wyoming) that concentrated land impact is far lower than the dispersed and quite large land impact from more “green” sources like trees, bamboo and other bio materials, but they are dirtier than coal. When you burn wood and weeds, particulate emissions are worse than coal. Sure, wood does not emit the sulfur and nitrogen that coal does, but remember sulfur and nitrogen are “natural” too – and in small amounts pose no particular risk to humans. In fact, coal generation is orders of magnitude cleaner today than it was 50 years ago and even a generation ago – getting to the point where sulfur and nitrogen emissions are closer to the “not a big deal” range than they are to “ending humanity” range. Burning wood and other biomass particular not in centralized power plants, is still an enormous risk to human health and well-being around the world – it would be a terrific research exercise for a student to articulate this and show this data.
In other words, coal is replacing something worse than coal. So, when we think about the “external damages” from coal, how come economists, serious ones, are committing the nirvana fallacy? The external costs of coal ought to at least be presented two ways – first in nirvana-model world, but also on a marginal or incremental basis. And on that measure, one would just as soon make an argument for the massive subsidization of coal given the enormous benefit it has produced for the environment. It has massively reduced air pollution that each particular individual faces (substituting macro-level pollution that in aggregate is less bad than the micro-level pollution faced by all of us). It has reduced pressure on land use, reducing our need to see a forest as a source of fuel and now allowing it as a source of both recreation and a provider of valuable ecosystem services. We can say more.
So, coal can easily be considered green even if we only look at a direct comparison to what it does in comparison to other energy sources. It does little to argue, “but solar is greener” first because that begs the question (and one in which we have before and will in the future address more here) and second because by arguing that “solar is greener” you are making my point. You are comparing solar to what it is replacing, coal, and not to nirvana world of pixie energy. So why are we not applying the SAME standard to coal?
If that is where the argument ended, I might indeed deserve some coal under my tree this year, or at least you might say, well, “sure, that’s nice, but we still should get rid of coal.” I suppose.
OK … that said, let’s look at some other estimates for how awful coal is:
- Burning coal causes $120 BILLION of damages per year.
- 13,000 deaths per year are attributable to our power plants each year (note of course how the media jump on this story and bury the fact that this number is HALF of what it was just a decade ago, or to compare it to other things that kill us, like auto deaths which are three times larger, or suicides which are right in this range). Coal also increases the number of heart attacks and hospitalizations in the 30,000 range.
- Coal damages are on the order of 18 cents per kilowatt hour of electricity. (these include acid-mine runoff, mountaintop removal (I’ve seen this, but the real story is not well told either – that’s for another post)
But coal is not only green because of what it displaces. But coal is green because it is cheap. The most serious risk to life and health and safety to all of humanity for all of human-time has been poverty. Man in its natural state is miserably poor and for a whole host of reasons. And one has to be an incredibly forked-tongued denier to disavow the role of coal and other concentrated energy sources in alleviating poverty since the Industrial Revolution. Take the absolute worst case estimates of how bad coal is from above (and go find some worse ones that exaggerate, they still are dwarfed by my point below) … and then compare them to how much wealth and well-being has been made possible because of coal, and because coal is cheap. Again, demonstrating this numerically would make for a super-research project for a student.
But one would have to be a supreme “Denier” to argue that cheap energy has not been good for humanity. Here is a summary paper on the role of energy in economic growth. Even a casual romp through the economics literature will show you dozens of paper talking about the importance of energy for raising living standards, and even for economic growth in rich countries, even as a smaller share of our economy is energy related today than at any point in history.
And what do we know about economic well being and environmental outcomes? Simply that richer is greener. The income elasticity of demand for environmental quality is measured to be quite large (perhaps over 2), meaning that as we get richer, we dedicate an increasing share of our “new income” to spending on cleaning our air, water and creating recreational spaces in the environment. And despite what people “tell” you, the impact of higher incomes on health and well-being are larger than the negative impacts of dirty coal on health and well-being … and it’s not even close. Think about what has happened to the quality of water in places that have abundant and cheap energy. Think about the length of life in places that have abundant and cheap electricity. Think about the cleanliness and safety of houses in places that have abundant and cheap energy. Think about how incredibly wealthier families are in the presence of cheaper energy. Even for me, who spends a measly share of his income on energy, imagine how much richer I would be if energy costs fell by half? Or 90%? Indeed, over time, coal has made the costs of energy fall by at least this much for a typical family.
Go look at the massive amounts of data … despite the horribleness of coal, it has enabled us, through cheap energy that is reliably produced, incredibly abundant and widespread, to live orders of magnitude better, even if it has some negative side-effects. Our abundant cheap energy IS the reason we are safer from weather and climate catastrophe today than at ANY point in human history. Even the tragedy in the Philippines would have been considerably worse without it. We are vastly, vastly safer today from weather, even if (i.e. no need to argue the point) extreme weather is more frequent and more violent today than in the past. And that else has cheap energy done? Well since it has directly made us richer and indirectly made us richer, people have behaved in a quite peculiar manner as they have gotten richer. How so? As we get richer, each woman in the population has … fewer kids. That’s right. We have “naturally” done what so many anti-human “E”nvironmentalists have wanted to do by the force of law or worse – we have ended the population “crisis’ (there never was a crisis). Demographers expect world population to stop growing sometime around mid-century, before we even hit 10 billion in population. And remember, that the planet can support an order of magnitude more people than that and population has NOT been shown to cause problems for economic and physical well-being thusfar. But we don’t need to argue that because cheap energy means richer people means lower fertility rates. And this is even true in places that “E”nvironmentalists like Paul Erhlich wrote off for dead 40 years ago. And I mean that. Fertility rates are falling even in places like India when “enlightened” people argued once that it was immoral to send them food aid in the midst of crisis since it would only encourage them to have more kids. Who’s the denier?
So, cheap energy due in large part to coal has not only displaced environmentally more harmful energy sources, it has, by making us rich, improved our health indirectly since richer is both healthier and more favorable to environmental protection. And cheap coal is a champion of human rights. We don’t need 1 child policies, or brutal treatment of women and families in order to control population – the cheap energy that fuels economic growth “naturally” reduces population pressures while at the same time enabling us to have the tools to deal with any problems that might come with it. Indeed, I would like to see very many inventions in history that have had such an incredibly powerful hand in improving the environment, health and material well-being of humanity as has coal. And don’t just join your tribe and call me stupid – show me, with data, anything that comes close. And for extra credit, please go examine any of the “good” things that are with us today and begin a conversation about them in the same way that we have been forced to have a conversation about coal. I am almost sure than many of the treasures we have today would never have been permitted if we treated them like we do a cold. And coal still has the potential to do this and more. In future posts we’ll show you just how abundant it is, and what the prospects might be for it being even cheaper. And before concluding, none of this post should be construed as a polemic against wind or solar or other kinds of energy. But the point of those energies should not be to say, “hey everyone, this stuff is cleaner, but more expensive, so deal with it,’ but rather, “this stuff is super cheap and abundant AND happens to be “cleaner” than coal, if in fact it is.”
The upshot is that I need a new “threat” for my childrens’ bad behavior. If they knew any better and stopped listening to their “teachers” in school, they would find the offer of coal in their stockings as one of most wonderous of miracles that they could imagine – as magical perhaps as the existence of Santa himself. After all, Santa can only bring toys (and socks!). When has Santa increase life-expectancy, saved forests, saved women from back-breaking wood collection and cooking over wood fires, cleaned water and made us safer in storms?
So Happy Chrisma-Hanu-Kwan-zika to all. I wish beyond wish that you, too, may have some coal at your holiday celebration.