Environmental Engineering Reference
In-Depth Information
generous tax benefits have been given to the developers
of some renewable energies (wind, ethanol). At the
same time, power producers have been heavily regulated
in many countries, and Gordon (1994) singled out the
general underpricing of electricity caused by this regula-
tion as a key market failure. Until March 1971, U.S. oil
prices were controlled through production quotas by a
very effective cartel, the Texas Railroad Commission,
and since 1973, OPEC—although its power has never
been such as to entirely overrule the market (Mabro
1992)—used production quotas in order to repeatedly
raise the price (Adelman 1997). One constant has
remained throughout these shifts: the world price of
crude oil bears virtually no relation to the actual cost of
extracting the fuel.
Excellent arguments can be made for even lower prices
of energy than those that have prevailed since WW I. At
the same time, most existing prices do not fully reflect
the real costs of fossil fuels and electricity, and the inclu-
sion of numerous environmental, health and safety, and
other externalities would push them higher (Hubbard
1991; Smil 2003). After the U.S. coal industry inter-
nalized many of its externalities (through regulations of
dust and methane levels, mine ventilation, and suppres-
sion of dust), its annual fatality rate fell impressively, and
it is now less than 1% of China's dismal record (MSHA
2000; Fridley et al. 2001). U.S. mining companies must
also contribute to the disability and compensation funds
put in place to ease the suffering of miners afflicted with
black-lung disease (Derickson 1998). Electrostatic pre-
cipitators, FGD, and NO
x
removal (and the first steps
toward carbon taxes in some EU countries) brought
coal-fired generation much closer to the real cost of ther-
mal electricity. But the true cost of fuels and electricity
remains a matter of contention.
Hohmeyer (1989) and Hohmeyer and Ottinger
(1991) calculated the external costs of German electricity
production to be of the same order of magnitude as
the internalized costs, but Friedrich and Voss (1993)
judged the methodologies used for those calculations un-
suitable and the estimates derived from them too high. A
European study concluded that the cost of producing
electricity from coal or oil would double and that natural
gas-generated electricity would cost 30% more if envi-
ronmental and health impacts (excluding those attrib-
utable to global warming) were taken into account
(ExternE 2001). But because the specific impact was
dominated by effects on human health (hence by total
populations affected), 1 t of particulates was calculated
to produce damage worth up to @57,000 in Paris but
only @1,300 in Finland.
An ORNL study found that damages from the U.S.
coal fuel cycle amount to merely 0.1 cent/kWh (Lee
et al. 1995), a negligible fraction of the average cost
of just over 6 cents/kWh and a total many magni-
tudes apart from Cullen's (1993) estimate of a tenfold
increase in actual fuel costs. Similarly, generalized dam-
age values adopted by some public utility commissions
in the United States during the 1990s not only differed
a great deal (e.g., more than a 30-fold range for damages
due to NO
x
) but they were typically much higher than
damages found by studies that modeled actual dispersion
and the impact of pollutants for specific sites (Martin
1995; Lee, Krupnik, and Burtraw 1995).
Health impacts generally dominate the cost of exter-
nalities but are most difficult to monetize because of
lifelong impacts of pollutants, dubious designs of epide-
miological studies, and problems of separating the effects
of individual pollutants (e.g., sulfates from general partic-
ulate matter) when people are exposed to complex, vary-
