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Bad Energy: The High Price of Coal

In the debate about how we should produce energy, it is routinely said that coal is cheap and renewables are expensive, and therefore we must continue business as usual to protect our economy. And what does business as usual mean? According to the U.S. Energy Information Administration:

The United States has more than 1,400 coal-fired electricity generating units in operation at more than 600 plants across the country. Together, these power plants generate almost half of the electricity produced in the United States and consume about one billion short tons of coal per year.

All this coal consumption is bad news for the climate: over a third of all carbon dioxide emissions by the U.S. come from burning coal. Burning coal also causes air pollution, and coal-burning plants are linked to high asthma rates in nearby cities. In addition, much coal today is mined by blowing off the top of mountains in Appalachia -- one of the most destructive forms of resource extraction imaginable.

The negative environmental impact of coal is hardly news, but now analysts are finding out something else about coal: It's not the "cheap" fuel that everyone thinks. Instead, the costs incurred due to coal’s adverse impacts on human health and the environment make coal far more expensive than your utility bill would lead you to believe.

Two new studies find that when coal’s true price is taken into account, renewables are far more cost-competitive.

A recently published paper in the American Economic Review by economists Nicholas Z. Muller, Robert Mendelsohn, and William Nordhaus detailed the true cost of current industrial production methods.  They found that the gross external damage (GED) from air pollution alone produced by industry was $184 billion a year. In calculating GED, the authors considered adverse consequences for human health, decreased timber and agriculture yields, reduced visibility, accelerated depreciation of materials, and reductions in recreation services. This aggregate figure of $184 billion is even higher when water, soil, and other natural resources are taken into account. Not surprisingly, coal-fired electric power generators produced the largest GED -- a staggering $53 billion annually. This number rises as high as $90 billion when the climate change effects of coal-related CO2 emissions are taken into account.

Another recent study undertaken by researchers at the Harvard Medical School Center for Health and the Global Environment found the life-cycle costs of coal-generated electricity, from extraction to combustion, ranged from $175 to $500 billion a year. These figures were reached by calculating the public health impacts alone.  Accounting for these costs adds anywhere from 9¢ to 26.7¢ per kilowatt hour to the coal’s price, making solar, wind, and other renewables far more economically competitive.

These numbers serve to highlight the urgent need to shift to a clean energy economy. Renewable energy production is becoming more efficient and its price is falling while at the same time the true costs of fossil fuel usage are becoming more apparent. Burning a billion tons of coal a year is not just bad for the polar bears, it's bad economics.

The path forward in terms of energy, the environment, and public health is clear: We must invest in a clean energy future both for the environment and our economy. An America with cleaner air, healthier people, more sustainable energy production, and a stronger economy is within reach; we just need to take the right steps to make it a reality.