When Your Product Has Negative Value

by James Wells

Imagine a situation where you had a product that might be useful for certain customers, but which was so harmful to everyone else that its harmful effects far exceeded the value of the product. Would you still sell it?

The US Coal industry finds itself in precisely that position. Thermal coal sells in bulk, for a price that varies across our country from about $10 a ton near the largest mines to as high as $80 a ton near the areas of highest usage. That’s the gross value to the customers, if you will.

The harm from coal includes health effects at every point in its handling — from the mine, to transport, to combustion. And then there is the harm from the greenhouse gas emissions, which are identified by the term Social Cost of Carbon. That is, the carbon emissions create a harm that can be estimated in terms of dollars per ton of CO2 emissions.

The United States government’s estimate for the social cost of carbon was recently updated in a report released by the White House in May 2013. That report shows a substantial increase in the calculated social cost of carbon dioxide emissions, as reported in Climate Progress ( http://thinkprogress.org/climate/2013/06/05/2103261/the-social-cost-of-carbon-is-almost-double-what-the-government-previously-thought ).

There are several different cost numbers, based on various assumptions such as the applicable discount rate per year, but let’s go with a middle-of-the-road number, being the average cost estimate using a 3 percent discount rate.

The Cost Of A Burial

That cost is 38 dollars of harm per metric ton of CO2 emissions. That number is a conservative value (in the old-school, meaningful, definition of the word “conservative”). Many other estimates of the social cost of carbon are much higher, up to $266 in harm per ton of carbon dioxide emissions.

For coal, it’s 1.8 times worse; that’s because coal emits approximately 1.8 tons of CO2 emissions per ton of coal.

So a ton of coal coming out of the ground is ready to cause 68 dollars of greenhouse gas harm to our world, exceeding the highest market value it could command anywhere in the United States.

Keep in mind that these costs completely ignore other massive health and environmental issues caused by mining, handling and combusting coal. For instance, a report from the Harvard Medical School’s Center for Health and

the Global Environment evaluated the direct health care costs of coal. As reported by The New York Times (http://green.blogs.nytimes.com/2011/02/17/tallying-coals-hidden-cost/)

“Even the study’s most conservative estimate of the uncounted cost of coal — $175 billion a year — would more than double the average cost of coal-fired electricity, the authors found.”

It has been known for some time that coal is less economic than renewable energy, if the pollution costs are figured in, but this is in a whole new world. Coal is beyond uneconomic — it has net negative value. Adding climate plus health effects together, it is deep underwater. In a world where all costs are properly accounted, you would have to pay someone to take it away and bury it.

The story of that negative value expressed in the cold hard numbers of economics can be told in other ways: people dying of respiratory diseases, lands turning permanently to drought, oceans dissolving the shells of formerly-abundant sea life.

And that brings us to the question of why in the world we would ever consider allowing large scale new plans to mine, transport and burn coal.

For existing mines and coal power plants, it’s a slightly different question, because those power plants create electric power that people depend on right now. In that case, it’s totally reasonable to consider how to gracefully plan a transition, over a period of years, to cleaner energy sources. The oldest, dirtiest, and least efficient power plants can be phased out first, and that’s in fact occurring.

But there is an obvious place to draw a bright white line. Planning for any new facilities to handle a substance and an activity that is well known to be net harmful – there’s a word for that.

The Word Is: Unconscionable

Building new coal infrastructure, knowing everything we know right now about the harms, is unconscionable.

This is a key concept because it goes beyond the question of whether it is a good idea or not. Lots of bad ideas go forward in this world. Many of them are legal and permitted. Laws or permitting processes are not designed to stop people or corporations from going forward with bad ideas.

But when a plan is known to be unconscionable, it can be stopped. That’s because specific concerns are no longer just cost items to be weighed against a plan that delivers overall benefit. Each specific concern becomes part of the proof that the plan delivers net harm. An unconscionable plan is one that politicians move away from, and deny they ever considered supporting. An unconscionable plan is one that causes regulators to look much more deeply at the standards they are supposed to uphold. An unconscionable plan awakens a community.

In the big decisions, the practical and the moral ultimately converge. That’s because a moral question is not an amorphous thing. A moral question involves the contemplation of intensely personal effects on real people. In coal’s case, the moral and the practical deliver us directly to the same word:

Unconscionable.