Friday, August 27, 2010

Coal ash and water pollution

A version of this story from USA Today appeared in today's local paper.

A new study suggests that damages from coal ash pollution are worse than we thought. The results are timely as the US EPA is about to begin a series of regional hearings on whether and how to regulate coal ash waste from coal-fired power plants.

Things to think about:

1. The negative externality. Is this a production externality or a consumption externality? Who are the market participants here? Who is on the demand side and who is on the supply side? Who is the third party affected by the externality? Have the health effects been qualified or quantified? Monetized?

2. Standards for pollution control. We'll get to the study of standards soon. For now, consider how and why EPA is considering restrictions. In terms of the 'how', Are limits (standards) on output or limits on technology being proposed? What should be the basis for the determination of acceptable standards? Health? Efficiency? Something else?

3. What are some important research questions related to this issue that would help inform policy?

Related local news here.

7 comments:

Filorux said...

I'm thinking about question #1, and I must raise a "point of inquiry". Are the facilities (landfills and impoundments) that are storing the CCRs owned and operated by the same firms that are burning the coal in the first place...in all cases, some cases, no cases?

If the firms are one and the same, it would appear that the market is between the electrical supplier and electrical consumer. There is a negative production externality because either the health cost associated with CCRs or the full cost of CCR storage is not taken into account in the cost of electricity production - the market then supplies more electricity than the socially optimal amount.

However, if those firms are not the same, then we are talking about the market for waste storage - the supplier is the landfill and the consumer is the electric company. Think about the waste for a moment - it already exists and so it has to be somewhere. If the electric company chooses to consume waste storage facilities, then they get the benefit of being rid of the waste and able to continue their operations. This is not the only benefit to be had from that transaction, however. Everyone will receive a benefit in that they will be less likely to get sick, save on transaction costs of going after a firm that chose to simply dump CCRs straight into the water supply, and etc...

This uncovers a positive consumption externality in the waste storage facilities market, which means that there will be less waste storage space produced than is socially optimal. If there is less waste storage space than is socially optimal, then the leftover waste has to go somewhere. What might we expect to see if this were the case? Overstuffed landfills? "...[L]andfills leaching into ground water and structural failures of impoundments, like that which occurred at the Tennessee Valley Authority’s plant in Kingston, Tennessee."

Ryan Ham

M.J. said...

Thinking about part 2. Why are they just now considering restrictions? Isn't this something that should have been thought about and worked on before over 100 sites started to screw up. Also, shouldn't all the sites be required to have monitoring wells?
But, that falls under the realm of standards, and since it appears that no standards where in place before the first dump site was allowed.

Speaking of technology. I am not as caught up on the tech front as I should, but if someone knows please inform the rest of us. Aren't we technologically advanced enough to not have something as primitive coal-fired power plants, I mean shouldn't they have been replaced shortly after coal burning trains? I could have sworn coal was one of those industrial revolution fuels and we have matured past that kind of useless health risk. Besides, if we stopped using this multifaceted endangerment we would see virtually no more reports of trapped miners.

Michael Cheatham

Ryan McKnight said...

In response to Michael C.'s question - Coal is currently cheaper, more abundant, and more efficient than the alternatives. Are we technologically advanced enough to obtain energy from other sources? Sure. Unfortunately, though, those technologies (e.g. solar and wind) just aren't cost competitive in all locations, yet. Legislate something like a carbon tax, however, and you might see the market shift.

Question 1:
In my opinion, the negative impact of coal-ash pollution is both a production and consumption externality. On the one hand, coal-ash pollution is associated with the consumption of the good. You are not paying for the coal-ash pollution when you buy the electricity. On the other hand, coal-ash pollution is associated with existing production techniques (the coal is “scrubbed” before it is burned and the waste is coal-ash). When the coal-ash is dumped, it imposes a cost on a third party – locals who drink the water. The power company does not pay the health bills of the person who gets sick as a result of coal-ash groundwater pollution.

The coal market participants: miners, mining companies, energy companies, consumers of electricity, and coal-ash disposal companies (if different than energy companies)

Demand: Consumers (electricity), energy companies (coal), mining companies (labor), dedicated disposal companies? (coal-ash?)

Supply: Miners (labor), mining companies (coal), energy companies (electricity and coal-ash?)

3rd Party Affected: People who are poisoned by the polluted water, people who lost their homes to the coal-ash spill in TN, etc. NPR Story of TN Spill
NYT coverage of TN spill


Question 2: - Basis for acceptable standards:
This is a difficult question. If you say, “health" is the only acceptable basis for standards, then the resulting restrictions could make further coal production prohibitively expensive (no more coal mining/burning). Of course, this scenario would never happen because the US runs on coal. Our economy would grind to a halt if we had to stop mining/burning coal tomorrow. On the other hand, if we discount/do not account for the negative health effects of mining/burning coal/depositing coal-ash, we mask the true (total) cost of coal based electricity.

What to do? – Find an acceptable health/efficiency balance

Question 3 - Research questions:
• How many people have suffered deleterious health effects as a result of the pollution from the known coal-ash dump sites?
- What is the monetary value of the negative health effects (hospital bills, cost of medicines, value of lost work, etc.)?

• How much will it cost to clean existing coal-ash dump sites? (CBA clean up sites now vs later?)
- Who will pay for it?

• Do any of the sites meet Superfund criteria?

• If we continue to burn coal, how can we prevent future coal-ash dump pollution?(e.g. CBA of alternative disposal methods?)

• How does the cost of coal based electricity production compare with the cost of “cleaner” fuels (e.g. wind, solar, etc.) after we account for the costs of the negative externalities associated with the burning and disposal of coal?

• How will new regulations affect the price of energy? (What is the cost to the energy consumer?)

Dr. Peter Schuhmann said...

Michael C., check out:

http://www.energy.gov/energysources/coal.htm

for more on coal.

Emily Gamble said...

Regarding question number one I would have to agree with Ryan, in that coal pollution is both a consumption and production externality. As consumers of electricity generated by coal fired power plants we are not paying the true cost of the use of this natural resource. The demand for cheap energy keeps coal companies in business despite the mounting evidence of the damage coal extraction and burning is doing to human health and the natural environment. When coal pollution is viewed as a production externality, it is ironically being paid for by society- most of whom pay “less” for cheap energy. Pollution from coal-fired power plants is responsible for 24,000 deaths a year in the United States. The US National Academy of Sciences estimates that coal and oil are equally responsible for $120 billion in health costs every year. Damages to the environment would be extremely difficult to put a dollar sign on because of how interrelated the different components of the environment are. For example, mercury released in the air during the burning of coal then becomes part of the water cycle, meaning that it can then literally reach anywhere in the world. So, while of course West Virginians did not ask to drink heavy metal-laden water and neighboring states did not wish for acid rain, the consumers of electricity from coal fired plants (nearly all of us) are the third party victim of a negative externality because of our own demands. As a society we have been more driven by cheap economic incentives rather than conscious consumption therefore “We have met the enemy and he is us” (Pogo).
A recent article with more information on wind vs coal technologies http://www.nytimes.com/2010/08/15/business/energy-environment/15coal.html
Also, part 3 research questions:
-Typically, under EPA guidelines for superfund/brownfield sites and other toxic sites of spills or contaminations, the “polluter pays.” However, how can the polluter pay for pollution that has reached areas far outside the contaminated site- like mercury in the atmosphere and toxic coal slurry that has seeped into groundwater?
- There are areas in Appalachia where mountain top removal mining has irreversibly altered the natural landscape. This results in vast amounts of runoff into mountain streams that contains toxic pollutants? Besides the degraded water quality, how can a company pay for a mountain that will never be there again?

Jessica M. said...

I will have to agree with others saying that this is a production and externality cost. Being one that understands the environmental side much more than the economics side of this class it baffles me that coal ash is only just now coming in to question. This made me think back to Dr.Schuhmann's "greed" post. Coal is a very very old technology and the science world has known that it is one of the biggest contributors to our environmental problems for a long time now, but it is the cheapest way for the suppliers to produce energy and maximize their profits. Are the companies being greedy? I would have to say yes. They know the effects that they are having on the environment and the people. The energy supply seems cheap to the consumers but how cheap is it really if it is causing all of these negative effects. However, on the consumer end, not everyone knows that their energy is even produced by coal, much less the effects of it. So are the consumers being greedy as well by buying this cheap energy produced by coal? No. They have very few other choices. A majority of our population is uninformed about other alternatives and can not afford their first time costs (costs of putting in solar panels or wind turbines). So if the public is uninformed and taking the cheapest of very few options for a necessity then it would be hard for me to say that they are greedy.

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