Environmental damages from U.S. power plants are down $100+ billion annually since 2010.
Remember 2010? It was not so long ago. Obama was President. The iPhone 4 was introduced. The Hurt Locker won six Oscars. Congress passed the Affordable Care Act.
Yet, though it might be hard to remember, the U.S. electric sector in 2010 was very different. Nearly twice as much power came from coal as from natural gas. In total, U.S. power plants emitted 15 billion pounds of sulfur dioxide, nitrogen oxides, and small particulates.
Nobody predicted the power sector would transform so quickly. If you have been following electricity markets, you probably knew things were changing. We’ve all read about natural gas supplanting coal, and about the growth of renewables. But when you translate that into US power plant emissions, the impact is eye-popping.
A new paper by economists Stephen Holland, Erin Mansur, Nicholas Muller, and Andrew Yates, released today by the National Bureau of Economic Research, shows us how far the U.S. power sector has come.
Holy cow, look at this figure.
Wow! Nitrogen oxides (NOx), small particulates (PM2.5), and carbon dioxide (CO2) are all way down. But the decrease for sulfur dioxide (SO2) is stunning – down 75% since 2010. These pollutant reductions mean reduced asthma, heart disease, lung cancer, and a whole host of other significant benefits.
The authors measure the economic benefits of the decline using an integrated assessment model. Altogether, they calculate that damages from the U.S. power sector have decreased since 2010 from $245 billion to $133 billion (in real 2014 dollars). That is, environmental damages are down $112 billion per year – a 46% decline. Let me say again, “Wow!”.
Unpacking The Damage Reductions
They find that 88% of the damage reductions come from reduced sulfur dioxide emissions. The other pollutants matter too, but sulfur dioxide dominates the impacts both because it is so damaging and because SO2 emissions decreased so much during this period.
Moreover, the aggregate gains are almost entirely due to lower damages from coal. Burning coal is about 18 times worse than burning natural gas in terms of local pollutants, so even though natural gas generation has increased, this is massively outweighed by reduced damages from coal.
Overall, the authors disaggregate the damage reductions into three categories:
- About 40% from the shift to cleaner plants, e.g., coal to natural gas
- About 40% from emissions reductions at existing plants, e.g. scrubbers
- About 20% from less fossil fuel generation overall, e.g. more renewables
This disaggregation is particularly interesting. My impression is that we’ve heard a lot about the first and third categories, but less about the second category. And, of course, with sulfur dioxide there is a lot that can be done to reduce emissions including not only scrubbers and other emissions control equipment but also substitution to low-sulfur coal.
The authors don’t try to answer everything. In particular, they don’t try to causally disentangle how much of this transformation was due to cheap natural gas, versus policies like the Mercury and Air Toxics Standards or Renewable Portfolio Standards. There is some related work doing some of this (here, here, and here), but the exact attribution to individual policies is not easy.
Electric Vehicles Get Cleaned Up
Almost everyone in the United States benefits from these pollution reductions. (Probably a lot of benefits in Canada and Mexico too!) But, their analysis is able to pinpoint the locations with the biggest reductions in pollution exposure. Most of the benefits are in the East, with residents of West Virginia, Pennsylvania, and Ohio at the top of the list.
Another, less obvious beneficiary is the electric vehicle sector. One of the consequences of a cleaner electric sector — is that EVs are now cleaner. In previous work, this same group of economists had shown that EVs actually increased air pollution damages in the Midwest and most of the East. No longer true. Now that the electric sector is cleaner, grid-powered EVs are cleaner than gasoline vehicles throughout the western United States and in virtually all cities of the eastern United States.
Recognizing the Progress
So in the United States have we “solved” electricity? No absolutely not. Damages from the U.S. power sector are still enormous and, in virtually all cases we have still failed to put a “price” on emissions. Moreover, carbon dioxide emissions have not declined nearly as much as emissions of local pollutants (NOx, PM2.5, and SO2).
But let’s take a minute and enjoy this good news. If not completely dethroned, King Coal is definitely on shaky ground. Moreover, existing plants are cleaner than ever – to a degree that I hadn’t realized. This is all good news for health and the environment.
For more see Stephen Holland, Erin Mansur, Nicholas Muller, and Andrew Yates, “Decompositions and Policy Consequences of an Extraordinary Decline in Air Pollution from Electricity Generation“.
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Lucas Davis is the Jeffrey A. Jacobs Distinguished Professor in Business and Technology at the Haas School of Business at the University of California, Berkeley. He is Faculty Director of the Energy Institute at Haas, a coeditor at the American Economic Journal: Economic Policy, and a Faculty Research Fellow at the National Bureau of Economic Research. He received a BA from Amherst College and a PhD in Economics from the University of Wisconsin. Prior to joining Haas in 2009, he was an assistant professor of Economics at the University of Michigan. His research focuses on energy and environmental markets, and in particular, on electricity and natural gas regulation, pricing in competitive and non-competitive markets, and the economic and business impacts of environmental policy.