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The High, Hidden Costs of Pollution from Coal-fired Electricity

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A new article in the American Economic Review presents a framework for evaluating the costs of pollution from different industries in the U.S. and finds coal-fired electricity to be the biggest culprit in terms of human health costs.

Increased deaths and harmful health impacts caused by emissions of sulfur dioxide (SO2), particulates (PM2.5) and nitrogen oxides (NOx) are major contributors to the external costs of coal-fired electricity generation, which add up to $53.4 billion a year, according to the authors (Nicholas Z. Muller, Robert Mendelsohn, and William Nordhaus). When the costs of climate change caused by carbon dioxide (CO2) emissions from power plants are also included, the costs go up by 30 to 40 percent.

There are lots of reasons to think these costs are actually an underestimate of the true costs of coal-fired power. For example, they only account for air pollution costs from a select set of pollutants and also do not include impacts of water and soil pollution. This means there are no estimates of damages from mercury, a potent neurotoxin whose largest remaining man-made source by far is emissions from coal power plants. In addition, the social cost of carbon (SCC) used in the CO2 cost calculations are likely a gross underestimate – the authors use a central estimate of $27/tC, whereas there is ample literature supporting much higher costs which rise over time as harmful emissions build up in the atmosphere. See here, here, here and here, for example.

Yet how refreshing to see this kind of research being published in a mainstream economics journal!

The message can’t get clearer than this: The largest industrial contributor to external costs is coal-fired electric generation. Coal-fired power is also identified as one of seven U.S. industries with air pollution damages that are clearly larger than their value added to the economy! That’s a pretty compelling reason to transition to cleaner, less polluting forms of energy.

So the next time you see the CEO of a major utility quoted in a news report, or yet another industry-funded study, claiming  that curtailing harmful emissions from coal-fired power is too costly, think about the costs we’re already forced to pay every day in terms of our health.

Posted in: Energy, Global Warming Tags:

About the author: Rachel Cleetus is an expert on the design and economic evaluation of climate and energy policies, as well as the costs of climate change. She holds a Ph.D. in economics. See Rachel's full bio.

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  • Henry F.

    This is not exactly an argument in favor of adopting electric cars. How does one reconcile this philosophical dissonance?

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