Loss of Life from Coal Pollution Outweighs Value of Electricity

A new study from the Environmental Integrity Project (EIP) finds that in many cases, the value of lost life from a coal plant’s pollution outweighs the value of the electricity that the plant produces. EIP looked at a large selection of coal plants from across the United States. Using conservative estimates, they determined that pollution at 18 coal-fired power plants led to a loss of human life that, when valued in 2012 dollars, was more significant than the value of the electricity that the plant sold. Of these 18 plants, 10 were in the Southeast (13 if you include Virginia and West Virginia in the region.)

EIP collaborated with Dr. Jonathan Levy, a professor at the Boston University School of Public health. Together they looked at publicly available government data on air pollution from coal plants. They were able to use atmospheric dispersion models to estimate how broadly that pollution spreads and how many people it could impact. Once they calculated the number of people likely impacted they used a peer-reviewed and widely accepted analysis to set a value to a human life and applied that number to the number of premature deaths resulting from each plant. The authors then simply calculated the total value of electricity sold from each plant by multiplying each plant’s net electricity generation by the average retail rate for electricity in the plant’s home state. If the cost in human lives was greater than the value of the electricity sold then EIP listed that plant in its new report.

The plants in SACE’s region are shown in the table below:

Luckily, the owners of most of these plants have, or are planning to, shut them down rather than invest the money necessary to reduce their life-threatening pollution. All of the plants noted here and located in Tennessee and the Carolinas are scheduled for retirement. However, a few plants stand out. The Tennessee Valley Authority’s Shawnee plant in Kentucky and Southern Company plants Yates and Greene County in Georgia and Alabama respectively are all ripe for retirement for economic reasons. This new report highlights that they are also ripe for retirement for reasons of human health and societal harms. In fact, taking only these three plants as examples, and using the most conservative numbers, they contribute to 219 deaths in a year. Using the report’s value of $8.3 million per human life, these plants cause $1.8 billion in damage, they only produce $1.2 billion in electricity.

One might criticize the authors’ methods and say that they have not put fair values on these variables of human life and the value of electricity. Perhaps that is true, but in that case I put the following question to the reader: Should the power companies charge you more for electricity or do the authors put too much value on a human life?

Tags: , , , ,


rssComments RSS

Dr. Levy would badly fail Econ 101. What he calculated is aggregate revenue (price times quantity), which is simply how much electricity costs to produce plus profits (also know as producer surplus.

What he does not include is consumer surplus – the amount of utility or benefit that individuals obtain from consuming electricity.

Consumer surplus + producer surplus is the true measure of the “value” of any economic good, not price x quantity, and that is what he should be comparing the “value of human life” to.

This is such an utter and rudimentary failure of elementary economics that it makes one unable to take anything the author says seriously.

Comment by Bart Johnson on June 18, 2012 5:25 pm

Mr. Johnson,

Thank you for the response. The first important point here is that Professor Levy was responsible for the human life valuation in this report, not the economic comparison so your attack is not on target. Perhaps more importantly, your attack also isn’t entierly accurate. In fact, economists recognize several ways of quantifying value and the price of a good or service is chief among them. Consider the fact that in the market place the price we pay for something is the most direct way to measure how much we value the utility of that good or service. If you believe that the price of electricity is not a good comparison in this case, then I understand your answer to my question in the final sentence of this post: You think that we pay too little for electricity.

Now consider the bigger picture. There is no doubt an extraordinary value to electricity. Even using a consumer surplus valuation, as you advocate, there is still an enormous cost to using coal to produce that electricity. In other words, the selection of a valuation method does nothing to save or improve the lives of those harmed by coal’s externalities. Electricity, with the same consumer surplus, the same value, also comes from healthier and more sustainable sources. As we make the transition to those sources, the value of electricity itself will not change, but its cost, in human life and other measures, will fall dramatically.

Comment by Josh Galperin, Esq. on June 21, 2012 8:57 am

Sorry, the comment form is closed at this time.