Editorial note: The price of energy should reflect its “true” cost, Roberts argues. Non-renewable dirty sources like coal should be priced to take into account their real impact on public health, the environment, and the food supply. Eliminating market distortions (subsidies and taxes) that favor unsustainable resources can influence the market to adopt sustainable energy practices. At the same time, we should support innovative clean energy solutions. Full-cost accounting will enable promising energy alternatives that lack political clout and capital infrastructure to be more viable than traditional resources like coal.
Since this will be my last entry in this exchange, let me try to get to the root of the issue.
I suspect that you, I, and most other energy analysts would prefer that free, open markets rather than politicians (or think tanks, or bloggers) ultimately determine which clean energy solutions are viable. For markets to work properly, however, they need transparent costs and pricing, low barriers to entry and exit, protection against monopolies, and full-cost accounting — not descriptors one typically attaches to energy markets. Wherever you go in the world, energy markets are distorted by a snarl of subsidies, tax breaks, sunk infrastructure costs, regulatory barriers, and entrenched political influence.
That suggests an energy policy with dual goals: 1) make energy markets more honest by removing distortions and 2) assist promising new clean energy solutions disadvantaged by existing distortions.
Full-cost accounting is at once the most difficult and the most important step. Ideally, each energy solution should have a market price that reflects its full social costs — pollution, health effects, climate change effects, land-use value, etc. — so that markets can make rational determinations. In the words of former Exxon Vice President Oystein Dahle, “Socialism collapsed because it did not allow the market to tell the economic truth. Capitalism may collapse because it does not allow the market to tell the ecological truth.”
How would coal fare if the market told the ecological truth? Not well. Truth means accounting for the horrific costs of mountaintop removal mining, which is destroying some of the world’s oldest mountains and the nation’s oldest communities in Appalachia. It means adding up the health care costs from respiratory ailments caused by mining and burning coal (the National Research Council puts these alone at more than $60 billion a year). It means sizing up coal’s full impact on the nation’s waterways, where over half the fish contain dangerous levels of mercury, causing lifelong damage to the nervous systems of fetuses and small children. It means counting the costs and risks of storing billions of tons of toxic coal ash (solid combustion waste) in enormous, unregulated pools across the country, which periodically flood nearby communities. It means acknowledging that America’s rail infrastructure is dominated by coal transport, which pushes other freight to more polluting heavy trucks. It means tallying up a century of taxpayer subsidies, which have been and continue to be overwhelmingly directed to fossil fuels. And of course it means accounting for the economic and ecological impacts of climate change.
Sequestering the CO2 emissions from coal plants would avoid some of that climate damage, but if taxpayers pick up the tab, it’s just another distorting subsidy atop the others.
It’s worth noting that even with this panoply of explicit and implicit subsidies, the U.S. coal power industry is moribund. For the past 30 years, utilities have opted to run existing plants harder, switch to natural gas, increase efficiency, or build out renewables like wind. Private investors have proven allergic to new coal plants — indeed, allergic to most huge, capital-intensive power projects — but positively enamored of renewables and efficiency, which risk less, build out faster, iterate faster, and reduce costs faster. And remember: money spent cleaning up coal makes it more expensive, whereas money spent on renewables makes them less expensive. (Clean electricity sources are all on declining cost curves.) This is a function of the simple engineering fact that it makes more sense to avoid waste than to ameliorate its effects.
In short, despite all its implicit and explicit subsidies, coal is already being outcompeted, and every market signal points toward acceleration of that trend. (The economic models you cite tend to a) ignore external costs, and b) underestimate technological innovation, which is why they consistently overestimate the cost and underestimate the benefits of environmental regulation.)
Here’s my strong prediction: the closer we get to full-cost accounting, the worse coal will look, especially with the added expense of a mind-bogglingly large carbon sequestration infrastructure. It’s manifesting first and most obviously in U.S. power markets, but it will ultimately prove true in China too. The Chinese will not blindly follow a falsely “cheap” path to their own collective suicide. The economic growth that keeps the Communist Party in power is being threatened by air pollution, water pollution, desertification, melting glaciers, and declining agricultural output. According to the World Bank, 750,000 people a year in China die prematurely from air and water pollution, and one study found that coal imposes $248 billion in hidden costs a year on the country. Coal plants exacerbate every one of those problems. As China takes its first hesitant steps toward full-cost accounting, already investment is shifting to renewables, efficiency, and clean transportation infrastructure. That shift will accelerate as renewables fall in price and carbon capture and sequestration (CCS) proves to be more expensive than anticipated (just as nuclear, the other silver-bullet hope, did in the 1970s). If Chinese leaders have shown anything, it’s that they’re willing to impose large-scale changes when they deem it necessary.
The strongest argument CCS proponents have is political: coal-related interests (both labor and industry) have a great deal of influence in the U.S. Congress. Clean energy legislation is unlikely to pass if they are threatened by it. Offering CCS as a positive vision of a future for coal is likely a necessary step in building a political coalition that can overcome the threat of a Senate filibuster. For that reason alone, those pushing for energy reform will have to reconcile themselves to substantial resources being devoted to research, pilot plants, and loan guarantees for the coal industry. Despite popular rhetoric about “not picking winners,” the fact is that passing legislation in a political system like ours always involves picking winners, otherwise known as getting votes.
Despite political necessities, though, support for CCS should strictly limit taxpayer liability. There should be a clear pathway for subsidies to decline over time and for the industry to begin paying its own way. Above all, we should avoid locking in permanent or uncapped taxpayer support for CCS. It should be given a fair shot at competing with other clean energy solutions, but only a fair shot.
As we build out a new energy system, we’ll find shifting to a green, clean economy is cheaper and faster than any of our models anticipated. Innovation will explode, new industries will boom, and ultimately “clean coal” will lose out to solutions for which the descriptor “clean” doesn’t require scare quotes.
Thanks again for this constructive and interesting exchange, and good luck on all your work toward our shared goals.