The Spirit of Green by William D. Nordhaus

Author:William D. Nordhaus
Language: eng
Format: epub
Publisher: Princeton University Press
Published: 2021-03-29T00:00:00+00:00

TABLE 16-2. Illustrative costs of the impact of externality pricing on the profits of coal-fired electricity generation

Costs, revenues, profits

Costs, revenues, profits ($/1000 kWh) at two different carbon prices

$0/tCO2

$100/tCO2

Revenues

60

60

Costs

Capital, fuel, other

32

32

Cost of CO2 emissions

0

81

Profits (revenues minus costs)

28

−52

Source: Estimates of costs are from the Energy Information Administration and are explained in detail in chapter 19.

Accurate estimates of the impact of externalities on profits is a complicated affair. One study led by Nicholas Muller used environmental and economic data to estimate the impact of the damages from air pollution on true prices and profits. In some cases the cost of pollution was so high that the true profits (or net social value of a product) were estimated to be negative. In looking at major industries, Muller et al. determined that the net social value of production was negative in seven industries because emissions regulations were so lax (implicitly, the price of emissions was set too low). These included not only coal-fired power plants (as in table 16-2) but also stone quarrying, solid waste incineration, sewage treatment plants, oil-fired power plants, marinas, and petroleum-coal product manufacturing.5

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