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All IPCC definitions taken from Climate Change 2007: The Physical Science Basis. Working Group I Contribution to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, Annex I, Glossary, pp. 941-954. Cambridge University Press.

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Coal Power Price and External Costs

Carbon dioxide emissions are a subsidy to fossil fuel producers and consumers in that the emissions impose various costs on society via climate change (reduced agricultural productivity, property damage, human health, etc.).  Since most countries don't yet put a price on carbon emissions, these indirect costs are not reflected in the market price of fossil fuels, which is artificially low.  Society as a whole picks up the tab for the indirect costs of pollution and climate change.  This graphic shows two estimates of the true total cost of electricity produced from coal in cents per kilowatt-hour, considering both the cost of the coal power (blue) and the cost to society of the "externalities" as estimated by two different groups.  The coal power price and the MMN11 externalities are from Muller, Mendelsohn, and Norhaus (2011) (MMN11), and the Epstein externalities are from Epstein et al. (2011).


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