Monday, May 23, 2011

Coal pollution externalities in VA

The Chesapeake Bay Foundation has released a report cataloging the economic and environmental impacts of a proposed coal-fired power plant.

Here's a short blurb at the Washington Post

Here's the full press release from CBF

OK, so what do we have to take into consideration?

First, the source of the report is a conservation agency. The Chesapeake Bay Foundation does great work. But they have an agenda. Here's a link to CBF's main page. I'm not saying that they are wrong or lying or fudging data, just saying that when analyzing a situation objectively we must always question the source of our information.

Second, coal generates most of our electricity. Nation-wide, around half of all electric power comes from coal. In the eastern part of the country it's a much higher percentage. (aside: Think that electric car is "clean and green"? Think again.) We use so much coal because it is cheap. If we're going to curtail the use of fossil fuels, we have to be willing to pay for it. Higher electricity rates, higher prices at the pump.

Third, the report suggests significant health and environmental impacts. These are well known. More here from The US EPA.

So, like most things in life we have a trade-off. There are benefits from our actions and there are costs. The economic question is: do the benefits outweigh the costs? i.e. Is it worth it?

Some of you are probably wondering how we can objectively compare these disparate costs and benefits. How can we compare the value we derive from cheap electricity with the value of human and environmental health? This is a central issue that we'll be dealing with in this class, and the unit on economic valuation will help quite a bit. Short answer: it's difficult, but we can do it.

Before we get to the details, consider this: when we make decisions as individuals about what to eat, how fast to drive, and how much to exercise, are we not implicitly placing a value on our own lives? When we make decisions about what products to consume, how much to recycle, whether to ride a bike or drive a car... are we not placing a value on the environment?

I know that many of you are environmental studies majors, so I want you to consider how you perceive the value of the environment... do you think that environmental quality is "priceless"? Or are you willing to sacrifice some environmental quality for your own comfort and convenience?

Likewise for the econ and business majors... do you think markets truly send appropriate signals in all cases? Or can markets fail to efficiently allocate resources in some situations?


Ben said...

I believe that most markets allocate resources in a reasonable way. I cannot however say that all markets do this perfectly. A lot of times communication and timing play a large part in who gets scarce resources and who doesn't. Often times corruption and neglect can plague unsupervised markets as well.

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