TODAY’S STUDY: THE DREADFUL EXPENSE OF CHEAP COAL

The name for a cost not included in the market price of something is EXTERNALITY (because that cost is external to the market price).

Much more than a term economists use, the concept fully explains why the U.S. has so little New Energy in its power mix. As highlighted in the report below on coal, the biggest part of the Old Energies' cost burden is not included in the pump and electricity bill prices but is externalized while the New Energies are forced to account for all their costs.

Case in point: At the beginning of World War II, oil tanker shipping routes from Texas to East Coast population centers were disrupted by German U-boat attacks. The decision was made by the Roosevelt administration to lay pipelines across the South and Midwest to New England. Big Inch and Little Big Inch, the biggest pipelines built to that time, were in place in less than two years without delays from EISs (Environmental Impact Studies) or significant hindrance from NIMBYs (Not-In-My-BackYarders) - and owned by Big Government to the enormous economic benefit of Big Oil.

Big Inch and Little Inch remain in service today while enough wind development is on hold across the country to supply a third of U.S. electricity needs because transmission - held up by NIMBY and BANANA (Build Absolutely Nothing Anywhere Near Anything) legal obstacles. The delays add significantly to the cost of building wind and, ultimately, to its market price. If and when that transmission gets built, it will be internal to (added to) the market price of wind - while oil's price continues to be artificially low, thanks to Big and Little Big Inch.

Oil's price is also artificially low thanks to taxpayer underwriting of the military exercises that protect its delivery from the most dangerous parts of the world. And taxpayer underwriting of the transportation system that supports oil consumption. And health insurance premium payers' underwriting of the burdens inflicted by oil burning's polluting emissions on respiratory health.

Including such costs into the prices paid for Old Energy power generation and transportation energy sources makes them far more expensive than the New Energies.

The thing that really should be externalized is the Old Energies in the U.S. power mix - in favor of this good earth's infinite and clean energy supplies from its sun, wind, deep heat and flowing waters.

Full cost accounting for the life cycle of coal
Epstein, et. al., 17 February 2011 (Annals of the New York Academy of Sciences)

Abstract

Each stage in the life cycle of coal—extraction, transport, processing, and combustion—generates a waste stream and carries multiple hazards for health and the environment.

These costs are external to the coal industry and are thus often considered “externalities.”

We estimate that the life cycle effects of coal and the waste stream generated are costing the U.S. public a third to over one-half of a trillion dollars annually. Many of these so-called externalities are, moreover, cumulative. Accounting for the damages conservatively doubles to triples the price of electricity from coal per kWh generated, making wind, solar, and other forms of nonfossil fuel power generation, along with investments in efficiency and electricity conservation methods, economically competitive. We focus on Appalachia, though coal is mined in other regions of the United States and is burned throughout the world.

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Introduction

Coal is currently the predominant fuel for electricity generation worldwide. In 2005, coal use generated 7,334 TWh (1 terawatt hour = 1 trillion watt-hours, a measure of power) of electricity, which was then 40% of all electricity worldwide. In 2005, coal-derived electricity was responsible for 7.856 Gt of CO2 emissions or 30% of all worldwide carbon dioxide (CO2) emissions, and 72% of CO2 emissions from power generation (one gigaton = one billion tons; one metric ton = 2,204 pounds.)1 Non–power-generation uses of coal, including industry (e.g., steel, glass-blowing), transport, residential services, and agriculture, were responsible for another 3.124 Gt of CO2, bringing coal's total burden of CO2 emissions to 41% of worldwide CO2 emissions in 2005.

By 2030, electricity demand worldwide is projected to double (from a 2005 baseline) to 35,384 TWh, an annual increase of 2.7%, with the quantity of electricity generated from coal growing 3.1% per annum to 15,796 TWh.1 In this same time period, worldwide CO2 emissions are projected to grow 1.8% per year, to 41.905 Gt, with emissions from the coal-power electricity sector projected to grow 2.3% per year to 13.884 Gt.

In the United States, coal has produced approximately half of the nation's electricity since 1995,2 and demand for electricity in the United States is projected to grow 1.3% per year from 2005 to 2030, to 5,947 TWh.1 In this same time period, coal-derived electricity is projected to grow 1.5% per year to 3,148 TWh (assuming no policy changes from the present).1 Other agencies show similar projections; the U.S. Energy Information Administration (EIA) projects that U.S. demand for coal power will grow from 1,934 TWh in 2006 to 2,334 TWh in 2030, or 0.8% growth per year.

To address the impact of coal on the global climate, carbon capture and storage (CCS) has been proposed. The costs of plant construction and the “energy penalty” from CCS, whereby 25–40% more coal would be needed to produce the same amount of energy, would increase the amount of coal mined, transported, processed, and combusted, as well as the waste generated, to produce the same amount of electricity.1, 4 Construction costs, compression, liquefaction and injection technology, new infrastructure, and the energy penalty would nearly double the costs of electricity generation from coal plants using current combustion technology…

Adequate energy planning requires an accurate assessment of coal reserves. The total recoverable reserves of coal worldwide have been estimated to be approximately 929 billion short tons (one short ton = 2,000 pounds).2 Two-thirds of this is found in four countries: U.S. 28%; Russia 19%; China 14%, and India 7%.6 In the United States, coal is mined in 25 states.2 Much of the new mining in Appalachia is projected to come from mountaintop removal (MTR).

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Peak Coal?

With 268 billion tons of estimated recoverable reserves (ERR) reported by the U.S. Energy Information Administration (EIA), it is often estimated that the United States has “200 years of coal” supply.7 However, the EIA has acknowledged that what the EIA terms ERR cannot technically be called “reserves” because they have not been analyzed for profitability of extraction.7 As a result, the oft-repeated claim of a “200 year supply” of U.S. coal does not appear to be grounded on thorough analysis of economically recoverable coal supplies.

Reviews of existing coal mine lifespan and economic recoverability reveal serious constraints on existing coal production and numerous constraints facing future coal mine expansion. Depending on the resolution of the geologic, economic, legal, and transportation constraints facing future coal mine expansion, the planning horizon for moving beyond coal may be as short as 20–30 years.

Recent multi-Hubbert cycle analysis estimates global peak coal production for 2011 and U.S. peak coal production for 2015.12 The potential of “peak coal” thus raises questions for investments in coal-fired plants and CCS.

Worldwide, China is the chief consumer of coal, burning more than the United States, the European Union, and Japan combined. With worldwide demand for electricity, and oil and natural gas insecurities growing, the price of coal on global markets doubled from March 2007 to March 2008: from $41 to $85 per ton.13 In 2010, it remained in the $70+/ton range.

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Coal burning produces one and a half times the CO2 emissions of oil combustion and twice that from burning natural gas (for an equal amount of energy produced). The process of converting coal-to-liquid (not addressed in this study) and burning that liquid fuel produces especially high levels of CO2 emissions.13 The waste of energy due to inefficiencies is also enormous. Energy specialist Amory Lovins estimates that after mining, processing, transporting and burning coal, and transmitting the electricity, only about 3% of the energy in the coal is used in incandescent light bulbs.

Thus, in the United States in 2005, coal produced 50% of the nation's electricity but 81% of the CO2 emissions.1 For 2030, coal is projected to produce 53% of U.S. power and 85% of the U.S. CO2 emissions from electricity generation. None of these figures includes the additional life cycle greenhouse gas (GHG) emissions from coal, including methane from coal mines, emissions from coal transport, other GHG emissions (e.g., particulates or black carbon), and carbon and nitrous oxide (N2O) emissions from land transformation in the case of MTR coal mining.

Coal mining and combustion releases many more chemicals than those responsible for climate forcing. Coal also contains mercury, lead, cadmium, arsenic, manganese, beryllium, chromium, and other toxic, and carcinogenic substances. Coal crushing, processing, and washing releases tons of particulate matter and chemicals on an annual basis and contaminates water, harming community public health and ecological systems.15–19 Coal combustion also results in emissions of NOx, sulfur dioxide (SO2), the particulates PM10 and PM2.5, and mercury; all of which negatively affect air quality and public health.

In addition, 70% of rail traffic in the United States is dedicated to shipping coal, and rail transport is associated with accidents and deaths.20 If coal use were to be expanded, land and transport infrastructure would be further stressed…

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Life cycle impacts of coal

The health and environmental hazards associated with coal stem from extraction, processing, transportation and combustion of coal; the aerosolized, solid, and liquid waste stream associated with mining, processing, and combustion; and the health, environmental, and economic impacts of climate change.

Underground mining and occupational health…Mountaintop removal…Methane…Impoundments…Processing plants…Coal combustion waste or fly ash…Local water contamination…

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Carcinogen emissions

Data on emissions of carcinogens due to coal mining and combustion are available in the Ecoinvent database.25 The eco-indicator impact assessment method was used to estimate health damages in disability-adjusted life years due to these emissions,25 and were valued using the VSL-year.26 This amounted to $11 billion per year, or 0.6 ¢/kWh, though these may be significant underestimates of the cancer burden associated with coal.

Of the emissions of carcinogens in the life cycle inventory (inventory of all environmental flows) for coal-derived power, 94% were emitted to water, 6% to air, and 0.03% were to soil, mainly consisting of arsenic and cadmium (note: these do not sum to 100% due to rounding).25 This number is not included in our total cost accounting to avoid double counting since these emissions may be responsible for health effects observed in mining communities.

Mining and community health…Ecological impacts…Imperiled aquatic ecosystems…Transport…

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Social and employment impacts

In Appalachia, as levels of mining increase, so do poverty rates and unemployment rates, while educational attainment rates and household income levels decline.19

While coal production has been steadily increasing (from 1973 to 2006), the number of employees at the mines increased dramatically from 1973 to 1979, then decreased to levels below 1973 employment levels.27 Between 1985 and 2005 employment in the Appalachian coal mining industry declined by 56% due to increases in mechanization for MTR and other surface mining.19, 27 There are 6,300 MTR and surface mining jobs in West Virginia, representing 0.7–0.8% of the state labor force.2 Coal companies are also employing more people through temporary mining agencies and populations are shifting: between 1995 and 2000 coal-mining West Virginian counties experienced a net loss of 639 people to migration compared with a net migration gain of 422 people in nonmining counties.

Combustion…Harmful algal blooms and dead zones…

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Coal’s contributions to climate change

The Intergovernmental Panel on Climate Change (IPCC) reported that annual global GHG emissions have—between 1970 and 2004—increased 70% to 49.0 Gt CO2-e/year.109 The International Energy Agency's Reference Scenario estimates that worldwide CO2 emissions will increase by 57% between 2005 and 2030, or 1.8% each year, to 41,905 Mt.1 In the same time period, CO2 emissions from coal-generated power are projected to increase 76.6% to 13,884 Mt.

In 2005, coal was responsible for 82% of the U.S.'s GHG emissions from power generation.110 In addition to direct stack emissions, there are methane emissions from coal mines, on the order of 3% of the stack emissions.110 There are also additional GHG emissions from the other uses of coal, approximately 139 Mt CO2.

Particulate matter (black carbon or soot) is also a heat-trapping agent, absorbing solar radiation, and, even at great distances, decreasing reflectivity (albedo) by settling in snow and ice.111–113 The contribution of particulates (from coal, diesel, and biomass burning) to climate change has, until recently, been underestimated. Though short-lived, the global warming potential per volume is 500 times that of CO2

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Climate change

Since the 1950s, the world ocean has accumulated 22 times as much heat as has the atmosphere,114 and the pattern of warming is unmistakably attributable to the increase in GHGs.115 Via this ocean repository and melting ice, global warming is changing the climate: causing warming, altered weather patterns, and sea level rise. Climate may change gradually or nonlinearly (in quantum jumps). The release of methane from Arctic seas and the changes in Earth's ice cover (thus albedo), are two potential amplifying feedbacks that could accelerate the rate of Earth's warming.

Just as we have underestimated the rate at which the climate would change, we have underestimated the pace of health and environmental impacts. Already the increases in asthma, heat waves, clusters of illnesses after heavy rain events and intense storms, and in the distribution of infectious diseases are apparent.116,117 Moreover, the unfolding impacts of climate instability hold yet even more profound impacts for public health, as the changes threaten the natural life-supporting systems upon which we depend.

The EIA2 estimated that 1.97 billion tons of CO2 and 9.3 million tons CO2e of N2O were emitted directly from coal-fired power plants. Using the social cost of carbon, this resulted in a total cost of $61.7 billion, or 3.06 ¢/kWh. Using the low and high estimates of the social cost of carbon results in cost of $20.56 billion to $205.6 billion, or 1.02 ¢/kWh to 10.2 ¢/kWh.

Black carbon emissions were also calculated using data from the EPA's eGRID database81 on electricity produced from lignite. The low, mean, and high energy density values for lignite5 was then used to calculate the amount of lignite consumed. The Cooke et al.118 emissions factor was used to estimate black carbon emissions based on lignite use and the Hansen et al.111 global temperature potential was used to convert these emissions to CO2e. This resulted in an estimate of 1.5 million tons CO2e being emitted in 2008, with a value of $45.2 million, or 0.002¢/kWh. Using our low and high estimates for the social cost of carbon and the high and low values for the energy density of lignite produced values of $12.3 million to $161.4 million, or 0.0006 ¢/kWh to 0.008¢/kWh.

One measure of the costs of climate change is the rising costs of extreme weather events, though these are also a function of and real estate and insurance values. Overall, the costs of weather-related disasters rose 10-fold from the 1980s to the 1990s (from an average of $4 bn/year to $40 bn/year) and jumped again in the past decade, reaching $225 bn in 2005.119 Worldwide, Munich Re—a company that insures insurers—reports that, in 2008, without Katrina-level disasters, weather-related “catastrophic losses” to the global economy were the third-highest in recorded history, topping $200 billion, including $45 billion in the United States.

The total costs of climate change damages from coal-derived power, including black carbon, CO2 and N2O emissions from combustion, land disturbance in MTR, and methane leakage from mines, is $63.9 billion dollars, or 3.15 ¢/kWh, with low and high estimates of $21.3 billion to $215.9 billion, or 1.06 ¢/kWh to 10.71 ¢/kWh. A broad examination of the costs of climate change121 projects global economic losses to between 5 and 20% of global gross domestic product ($1.75–$7 trillion in 2005 US$); the higher figure based on the potential collapse of ecosystems, such as coral reefs and widespread forest and crop losses. With coal contributing at least one-third of the heat-trapping chemicals, these projections offer a sobering perspective on the evolving costs of coal; costs that can be projected to rise (linearly or nonlinearly) over time.

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Carbon capture and storage

Burning coal with CO2 CCS in terrestrial, ocean, and deep ocean sediments are proposed methods of deriving “clean coal.” But—in addition to the control technique not altering the upstream life cycle costs—significant obstacles lie in the way, including the costs of construction of suitable plants and underground storage facilities, and the “energy penalty” requiring that coal consumption per unit of energy produced by the power plant increase by 25–40% depending on the technologies used...

Retrofitting old plants—the largest source of CO2 in the United States—may exact an even larger energy penalty. The energy penalty means that more coal is needed to produce the same quantity of electricity, necessitating more mining, processing, and transporting of coal and resulting in a larger waste stream to produce the same amount of electricity. Coal-fired plants would still require locally polluting diesel trucks to deliver the coal, and generate CCW ponds that can contaminate ground water. Given current siting patterns, such impacts often fall disproportionately on economically disadvantaged communities. The energy penalty combined with other increased costs of operating a CCS plant would nearly double the cost of generating electricity from that plant, depending on the technology used...

The U.S. Department of Energy estimates that an underground volume of 30,000 km2 will be needed per year to reduce the CO2 emissions from coal by 20% by 2050 (the total land mass of the continental U.S. (48 states) is 9,158,960 km2).

The safety and ensurability of scaling up the storage of the billion tons of CO2 generated each year into the foreseeable future are unknown. Extrapolating from localized experiments, injecting fractions of the volumes that will have to be stored to make a significant difference in emissions, is fraught with numerous assumptions. Bringing CCS to scale raises additional risks, in terms of pressures underground. In addition to this, according to the U.S. Government Accountability Office (2008) there are regulatory, legal and liability uncertainties, and there is “significant cost of retrofitting existing plants that are single largest source of CO2 emissions in the United States”...

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Health and environmental risks of CCS

The Special IPCC Report on Carbon Dioxide Capture and Storage42 lists the following concerns for CCS in underground terrestrial sites:

1 Storing compressed and liquefied CO2 underground can acidify saline aquifers (akin to ocean acidification) and leach heavy metals, such as arsenic and lead, into ground water.

2 Acidification of ground water increases fluid-rock interactions that enhance calcite dissolution and solubility, and can lead to fractures in limestone (CaCO3) and subsequent releases of CO2 in high concentrations.124

3 Increased pressures may cause leaks and releases from previously drilled (often unmapped) pathways.

4 Increased pressures could destabilize underground faults and lead to earthquakes.

5 Large leaks and releases of concentrated CO2 are toxic to plants and animals.
 a. The 2006 Mammoth Mountain, CA release left dead stands of trees.

6 Microbial communities may be altered, with release of other gases.

The figures in Table 2 represent costs for new construction. Costs for retrofits (where CCS is installed on an active plant) and rebuilds (where CCS is installed on an active plant and the combustion technology is upgraded) are highly uncertain because they are extremely dependent on site conditions and precisely what technology the coal plant is upgraded to.5 It does appear that complete rebuilds are more economically attractive than retrofits, and that “carbon-capture ready” plants are not economically desirable to build...

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Susidies

In Kentucky, coal brings in an estimated $528 million in state revenues, but is responsible for $643 million in state expenditures. The net impact, therefore, is a loss of $115 million to the state of Kentucky.126 These figures do not include costs of health care, lost productivity, water treatment for siltation and water infrastructure, limited development potential due to poor air quality, and social expenditures associated with declines in employment and related economic hardships of coal-field communities.126

The U.S. Federal Government provides subsides for electricity and mining activities, and these have been tallied by both the EIA and the Environmental Law Institute.2, 127, 128 The EIA estimate is $3.17 billion of subsidies in 2007, or 0.16¢/kWh, and the Environmental Law Institute estimate is $5.37 billion for 2007, or 0.27¢/kWh.

Abandoned mine lands…

Results

The tabulation of the externalities in total and converted to 2008 US$ is given in Table 3 and normalized to cents per kWh of coal-generated electricity in Table 4. Our best estimate for the externalities related to coal is $345.3 billion (range: $175.2 bn to $523.3 bn). On a per-kWh basis this is 17.84¢/kWh, ranging from 9.42 ¢/kWh to 26.89 ¢/kWh.

A 2010 Clean Air Task Force56 (CATF) report, with Abt Associates consulting, lists 13,000 premature deaths due to air pollution from all electricity generation in 2010, a decrease in their estimates from previous years. They attribute the drop to 105 scrubbers installed since 2005, the year in which we based our calculations. We were pleased to see improvements reported in air quality and health outcomes. There is, however, considerable uncertainty regarding the actual numbers. Using the epidemiology from the “Six Cities Study” implies up to 34,000 premature deaths in 2010. Thus, our figures are mid-range while those of the CATF represent the most conservative of estimates.

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Conclusions

The electricity derived from coal is an integral part of our daily lives. However, coal carries a heavy burden. The yearly and cumulative costs stemming from the aerosolized, solid, and water pollutants associated with the mining, processing, transport, and combustion of coal affect individuals, families, communities, ecological integrity, and the global climate. The economic implications go far beyond the prices we pay for electricity.

Our comprehensive review finds that the best estimate for the total economically quantifiable costs, based on a conservative weighting of many of the study findings, amount to some $345.3 billion, adding close to 17.8¢/kWh of electricity generated from coal. The low estimate is $175 billion, or over 9¢/kWh, while the true monetizable costs could be as much as the upper bounds of $523.3 billion, adding close to 26.89¢/kWh.

These and the more difficult to quantify externalities are borne by the general public.

Still these figures do not represent the full societal and environmental burden of coal. In quantifying the damages, we have omitted the impacts of toxic chemicals and heavy metals on ecological systems and diverse plants and animals; some ill-health endpoints (morbidity) aside from mortality related to air pollutants released through coal combustion that are still not captured; the direct risks and hazards posed by sludge, slurry, and CCW impoundments; the full contributions of nitrogen deposition to eutrophication of fresh and coastal sea water; the prolonged impacts of acid rain and acid mine drainage; many of the long-term impacts on the physical and mental health of those living in coal-field regions and nearby MTR sites; some of the health impacts and climate forcing due to increased tropospheric ozone formation; and the full assessment of impacts due to an increasingly unstable climate.

The true ecological and health costs of coal are thus far greater than the numbers suggest. Accounting for the many external costs over the life cycle for coal-derived electricity conservatively doubles to triples the price of coal per kWh of electricity generated.

Our analysis also suggests that the proposed measure to address one of the emissions—CO2, via CCS—is costly and carries numerous health and environmental risks, which would be multiplied if CCS were deployed on a wide scale. The combination of new technologies and the “energy penalty” will, conservatively, almost double the costs to operate the utility plants. In addition, questions about the reserves of economically recoverable coal in the United States carry implications for future investments into coal-related infrastructure.

Public policies, including the Clean Air Act and New Source Performance Review, are in place to help control these externalities; however, the actual impacts and damages remain substantial. These costs must be accounted for in formulating public policies and for guiding private sector practices, including project financing and insurance underwriting of coal-fired plants with and without CCS.

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Recommendations

1 Comprehensive comparative analyses of life cycle costs of all electricity generation technologies and practices are needed to guide the development of future energy policies.

2 Begin phasing out coal and phasing in cleanly powered smart grids, using place-appropriate alternative energy sources.

3 A healthy energy future can include electric vehicles, plugged into cleanly powered smart grids; and healthy cities initiatives, including green buildings, roof-top gardens, public transport, and smart growth.

4 Alternative industrial and farming policies are needed for coal-field regions, to support the manufacture and installation of solar, wind, small-scale hydro, and smart grid technologies. Rural electric co-ops can help in meeting consumer demands.

5 We must end MTR mining, reclaim all MTR sites and abandoned mine lands, and ensure that local water sources are safe for consumption.

6 Funds are needed for clean enterprises, reclamation, and water treatment.

7 Fund-generating methods include:
 a. maintaining revenues from the workers’ compensation coal tax;
 b. increasing coal severance tax rates;
 c. increasing fees on coal haul trucks and trains;
 d. reforming the structure of credits and taxes to remove misaligned incentives;
 e. reforming federal and state subsidies to incentivize clean technology infrastructure.

8 To transform our energy infrastructure, we must realign federal and state rules, regulations, and rewards to stimulate manufacturing of and markets for clean and efficient energy systems. Such a transformation would be beneficial for our health, for the environment, for sustained economic health, and would contribute to stabilizing the global climate.