Coal-fired power plants?science, technology and environmental policy issues

Abstract

Views on most environmental protection and related policy issues vary widely and become controversial rapidly. A recent case of the control of air emissions from coal-fired power plants is one example. In this case, it is pitting governmental agencies at the federal level against state and regional agencies, and industry groups against environmental and public interest groups. Is there a consensus building approach which might mitigate these adversarial procedures and find economically sound and environmental desirable solutions? One example of pitching federal regulatory agencies (for example the Environmental Protection Agency) against State and Regional groups is demonstrated in a recent Business Review article (Durr 2003). As reported in this article, the New York Attorney General has become a lead player in a lawsuite filed challenging the EPA’s Clean Air Regulations. The District of Columbia and eleven states have joined in challenging these new regulations that ostensibly provide unfair relief to the electricity industry regarding pollution control equipment installation. The lawsuit argues that the new interpretation of the Clean Air Act will sharply weaken national air-pollution protection standards and result in considerable damage to the environment, while benefiting the electricity industry at the expense of public health and the environment. Most people generally agree that introduction of an external force, such as environmental regulations, into a free market economy is likely to disrupt its efficiency. It is generally believed that perfectly competitive markets, devoid of such regulations, can produce Pareto optimal outcomes. Environmental regulations, as being litigated in the case of the control of air emissions from coal-fired boilers, can affect the cost of energy production and create many uncertainties in terms of completion of new energy projects or upgrading of existing energy power plants. Energy produced from coal is very important since more than 50% of electricity in the United States is produced using coal as a fuel. How does this problem arise in the first place? Since labor and capital are scarce resources, their consumption is minimized by industry; and since environment is viewed as a free resource, it is natural that its consumption is ignored. Simply put, some economic and social costs are just not reflected in the market exchange of goods and services, in this case the producers and consumers of electric power. Also, one cannot ignore the third-party interest when considering two-party transactions of the electric power buyers and the utility companies. This is a classic case of existence of externalities. Many of the pollutants discharged by the power plants primarily impact northeast regions of the United States while much of the electricity produced is consumed in other parts of the United States. Thus, this transaction results in ‘‘market failure’’. To correct this case of market failure, two choices exist. One can attempt to isolate the causes of the failure and restore, as nearly as possible, an efficient market process by internalizing the cost of environmental control or somehow compensate those affected by the harmful emissions (input oriented). Alternatively, market failure can be corrected by bypassing the market and promulgating regulations to achieve a certain degree of environmental protection (output oriented). Arguments have been put forth to achieve a certain level of environmental protection by using market mechanisms as compared to command and control regulatory approaches. These are very interesting arguments and, clearly, market approaches are always preferable and more sustainable than command and control regulations. There are, however, some problems with using only the market approaches of buying and selling credits for environmental emissions as has been recently suggested in the case of coal-fired power plants. One specific issue identified is the existence of ‘‘hot-spots’’ with high levels of mercury emissions. How does one compensate those affected by this? In a recent article in Environmental Science and Technology (Hanisch 1998) it was documented that incinerators and coal-fired boilers emit more mercury to the atmosphere than all other point sources combined. Coalfired boilers are the largest point source of unregulated mercury emissions in the United States. Incidentally, serious neurological effects of mercury on humans and its potential for causing birth defects are well established. The great risks for human health and environment resulting from emissions from coal-fired boilers have prompted the recent litigations. While these litigations will likely continue, a consensus building approach may help achieve goals in a more cost effective manner than other approaches by themselves Editorial Clean Techn Environ Policy 6 (2004) 73–74 DOI 10.1007/s10098-004-0243-1