April 20, 2011

Updated 5-18: Reverse Corruption And Breathe Easier

Some facts speak for themselves:
"Coal-fired power plants...produce more hazardous air emissions than any other industrial pollution sources....Over 386,000 tons of 84 separate hazardous air pollutants spew from over 400 plants in 46 states."

This topic is so relevant that I prefer to update it for a while instead of rushing on to other topics.
(4-20 update at bottom of post)
(4-27 update at bottom of post)

(update 5-18: David Leonhardt at the NYTimes, and new papers on this true cost of power)

Logically, even if you are lucky enough to avoid much of this pollutant load where you live, you occasionally breathe it right into your lungs, when the wind direction happens to bring it to you. When that happens, your body takes in, among other toxins, mercury. Mercury damages the nervous system.

Understanding the true extent of coal burning pollutants will give the well-informed a lot more concern than the tiny extra radioactive particle load from Japan lately. The health effects are orders of magnitude more serious.

But no health costs created by the actions of businesses should be paid by the victims alone, while little or none of the costs are born by those making the profits from emitting these toxins.

When the utilities and businesses emitting toxins bear little or none of the costs, it is a form of corruption. And in fact, often such corruption has literally been enacted into law.

Liability limits are a prime example of such corruption enacted into law.


Consider whether nuclear power in the form we have subsidized and tolerated so long is a good idea to begin with.

This is a complex question, and without trying to review how we got here (but for those that wish to hear some on that: here's a good Fresh Air interview) -- we can instead apply a powerful concept to discriminate whether this kind of nuclear power, or future kinds, are really worthwhile.

It is the wisdom of the crowd combined with the maximization of utility and the internalization of externals.

Simply put, every source of electric power for businesses and consumers should have its true, full costs put into the final price the consumers of electricity pay. The same should apply to oil products like gasoline.

This would look very different than what we have now.

For example, about 45% of US electricity comes from coal, but that is in part because we subsidize coal electricity production by allowing coal burning utilities to emit harmful emissions without paying their true health and environmental costs. We subsidize coal burning profoundly.

The degree of subsidy would be a surprise to many, no doubt.

We know we have subsidized nuclear power in several ways also, including costs of emissions.

In short, we subsidize the wasting of energy by making energy prices artificially cheap compared to true costs.

The full costs of an energy source includes all the costs -- health costs such as asthma and deaths from coal burning, coal-emitted mercury contamination of soil and people, massive climate change costs of carbon burning, nuclear contamination and storage costs, the costs of naval fleets and operations in the Persian Gulf to protect oil shipping lanes, and....finally, direct subsidies.

If all the true costs of every energy source -- nuclear, coal, oil, wind, solar -- were fully included in the final prices consumers pay, then we would all be able to choose more wisely and choose how to conserve, and which source to use.

True pricing would drastically alter our energy use for the better, and greatly aid the environment, and greatly improve the lives of our children through direct health effects.

How to do this? End all subsidies of all kinds for all energy sources now, and include in oil taxes the true full costs of defense and climate change, and for coal the true costs of pollutants and climate change cost estimates directly as fees on the users (utilities) in proportion to emissions, all the costs of nuclear that haven't been included like disposal and health costs (one way to figure health costs for a reactor type is to use a global average of health costs per year to date for that reactor type), and for solar the costs of solar panel production pollutants, and for wind energy the electrical transmission build out costs. Simply include the costs in the price to each source!

Likely many existing nuclear plants in the US, having had so much of their costs paid via subsidies from taxpayers already, would be viable as they exist now. Current operational costs are low, while spent fuel storage costs for newly spent fuel are diluted due to the existing necessity to store large amounts of spent fuel from decommissioned reactors and military sources (the marginal cost for new electricity generation creating more spent fuel doesn't add much to the existing large (overhead) costs all nuclear activities have already incurred.). In short, the storage costs are already here, and a little more doesn't amount to much.

The more interesting and significant consequence would arise from including costs based on risk assessments. Risk-assessed insurance costs -- without a liability cap -- would force some reactor operators to do significant modifications to reduce risks so as to remain economically viable.

Some reactors might not be modifiable enough to sustain risk-costs and become uneconomic and get shut down. Imposing true costs would lead to a more thorough and rapid change in improving backup systems and strategies. It's one thing to be regulated, another thing to have to pay for risk-costs in actual dollars.

It's far, far stronger incentive.

Finally, as wind power transmission and storage technology improves some of the plants might become uneconomic and get shut down earlier than they would have before. True costs make this timing rational and economic.

Once we approach that true pricing, the wisdom of the crowd will take over and make wise choices. People will conserve due to higher costs becoming finally visible -- you pay in your electric bill instead of in your tax bill or in your health insurance bill.

Conservation would sharpen and quicken.

The environmental and health outcomes would amaze those skeptical of economics and markets, who typically don't realize how profound are the effects of corruption and subsidy on this scale.

Update 4-20 PM:
I just visited the NYTimes and this caught my eye:
The new settlement between the Environmental Protection Agency, other plaintiffs and the Tennessee Valley Authority resolving clean air violations at 11 T.V.A. coal-fired power plants...

Under the deal, the federally run authority will close 18 of its oldest and dirtiest coal-fired boilers in Tennessee, Kentucky and Alabama, spend $3 billion to $5 billion over the next decade to install state-of-the-art pollution controls at about three dozen other units, and invest $350 million in energy efficiency and renewable energy projects.

The E.P.A. estimates that the agreement will reduce emissions of nitrogen oxides and sulfur dioxide by nearly 70 percent, preventing 1,200 to 3,000 premature deaths, 2,000 heart attacks and 21,000 asthma attacks annually.

When I started writing parts of this post earlier this month I had no idea such a negotiation was on. On one level, this is delightful. But when we compared this to the total emission load of coal burning in the US, these TVA changes will still be only a modest fraction of the problem.

That such a large step still falls far short of the overall problem shows how much benefit we would get from true pricing across the board.

Imagine if true pricing was imposed 12 months from now. Do you think it would take some large part of a decade for those modifications mentioned above? I'd bet more like 1-3 years.


4-27: NPR's Talk of the Nation goes over some of my points (listen below).

By the way, I was reading James Fallows when I was in my early twenties (in The Atlantic probably). That was 25 years ago. It seems like he's been around forever. Wouldn't it have been fun if he, say, referenced my blog. No doubt, many sources have pointed out various of these points, but it's better in a consistent economic framework, as I've tried to lay it out above. While the talk show is worthwhile, the needed insight comes across better in a broad view presented all together.

Heh, perhaps I should try to be a blogger at The Atlantic. Anyone know Fallows personally?

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