Sunday, October 9, 2011

Cost of coal-fired power (more)

In my post of 23 April 2011, I analysed how the inclusion of a Social Cost on Carbon (SCC) would affect the Levelised Electricity Cost of coal-fired power.  The SCC is measured in $ per tonne of CO2 emitted.  As a rule of thumb, every $ increase in the SCC translates to an extra $ on the LEC for coal-fired plants when expressed in $/MWhr.

My post referred to an authoritative report [1] on externalities associated with coal-fired power.

Recently, dana1981 at Skeptical Science has commented on the results of another study on the cost of externalities on coal-fired power.  This study [2] claims a mid-range SCC of USD 27/t, with lower and upper estimates USD 6/t and USD 65/t respectively.  dana1981 points out that cost of externalities in reference [2] are significantly less than those in [1], mainly because of differing treatments of (non-CO2) air pollution effects.

Despite the discrepancies in the figures, both studies agree that the cost of coal-fired power generation does not include the cost of externalities and, therefore, the true cost of coal-fired power generation is definitely more than the price that we pay.  We can expect further publications in the economic literature to clarify these important issues.  Hopefully the studies will also include the effect of hidden subsidies to the coal industry.

For further discussion, I refer you to the excellent post by dana1981.

Note added (16 October 2011):

dana1981 has made a supplementary post on this topic,,
in which it's noted that the social cost of carbon discussed by Muller, Mendelsohn & Nordhaus was based on C emitted, not CO2.  To convert the SCC of MMN into the more conventional form, divide the MMN figure by 44/16 = 2.75 to get the cost of CO2.  The MMN figures were low already; with this correction they are just too low to be taken seriously.

[1]  P R Epstein et al. “Full cost accounting of the life cycle of coal”, Annals of the NY Academy of Sciences 1219 (2011), 73-98. 
[2]  N Z Muller, R Mendelsohn & W Nordhaus, “Environmental accounting for pollution in the United States economy”, American Economic Review, 101(5) (2011), 1649-75.

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