The Environmental movement in the US is doing serious backflips over a study which appeared in the August 2011 edition of the American Economic Review. The study purports to demonstrate a framework for including environmental externalities in the calculation of national accounts. What has the greens blowing confetti (responsibly sourced) is that the accounts estimate that coal as a source of energy costs between 0.8 to 5.6 times its value in environmental damages to the US economy. Big coal is going to flip its mountain-top on this one. I have to get my library access restored to see the full report – more on this later – but for now here is the tantalizing abstract:
This study presents a framework to include environmental externalities into a system of national accounts. The paper estimates the air pollution damages for each industry in the United States. An integrated-assessment model quantifies the marginal damages of air pollution emissions for the US which are multiplied times the quantity of emissions by industry to compute gross damages. Solid waste combustion, sewage treatment, stone quarrying, marinas, and oil and coal-fired power plants have air pollution damages larger than their value added. The largest industrial contributor to external costs is coal-fired electric generation, whose damages range from 0.8 to 5.6 times value added. (JEL E01, L94, Q53, Q56)
|Muller, Nicholas Z., Robert Mendelsohn, and William Nordhaus. 2011. “Environmental Accounting for Pollution in the United States Economy.” American Economic Review, 101(5): 1649–75.