buying habits

In a magnificent display of self-delusion, the green movement is holding a demonstration at the Capitol’s power plant today to protest the continued use of coal to keep people warm. Although I’d love to put the continued operation of Congress at the mercy of the weather, there is a more important point here. Coal is Affordable energy increases people’s income, keeps them in jobs, and keeps them alive. Here is a brief summary of some important research on the subject.

The Human Consequences of Global Warming Alarmism

• Raising energy costs kills. According to a Johns Hopkins study, replacing ¾ of US coal-based energy with higher priced energy would lead to 150,000 extra premature deaths annually in the US alone.
• Reducing emissions hits the poorest hardest. According to the recent report by the Congressional Budget Office, a cap and trade system aimed at reducing emissions by just 15 percent will cost the poorest quintile 3 percent of their annual household income, while benefiting the richest quintile.
• Raising energy costs loses jobs. According to a Penn State study, replacing 2/3 of US coal-based energy with higher priced energy will cost almost 3 million jobs, and perhaps over 4 million.

More detailed points

• We are already seeing the adverse effects of global warming policies in the ethanol debacle. Ethanol mandates have not just contributed to the spike in the price of gas, but have also increased food prices. Steaks are up 5.5% from a year ago, chickens up 7.7%. These increased costs force the poorest to make hard choices.
• The ethanol mandates also demonstrate that consumer behavior can’t be fine tuned. As fuel and food prices increased, the choices people made showed that they sacrifice food for fuel. A survey by the Food Marketing Institute found that more than 40% of consumers changed their food-buying habits in response to high gas prices. That illustrates that energy is one of the most important purchases they make.
• Coal production is also fundamental to the US economy. The Penn State study found that by 2015, coal production, transportation and consumption will contribute $1 trillion to the US economy and provide 6.8 million jobs and $362 billion in household income.
• That same study shows pronounced regional variations. If coal production was curtailed by 2/3rds, California would be hard hit. It would lose $58 million in economic activity. California households would lose $22 million a year. And 339,000 Californians would lose their jobs.
• But the states of the Central US would be worst hit – Arkansas, Iowa, Kansas, Louisiana, Minnesota, Missouri, Nebraska, Oklahoma and Texas would lose 1.5 million jobs between them.
• Legislators must consider the unintended effects of their actions. If coal production is to be stamped out, the railroad industry in this country would probably collapse along with it. Without rail transport, other bulk commodities would rise in price. And they would increase congestion on the roads, which don’t have enough capacity to deal with freight transport as it is.

Background: Lives Lost

The Johns Hopkins study (Harvey Brenner, “Health Benefits of Low Cost Energy: An Econometric Case Study,” Environmental Manager, November 2005) found the following:

An econometric model was applied to a hypothetical regulatory case study, whereby U.S. coal was replaced by alternative higher-cost fuels such as natural gas for the purpose of electricity generation. The model was used to estimate the premature mortality associated with increased unemployment and reduced personal income. The adverse impacts on household income and unemployment due to the substitution of higher-cost energy sources were estimated to result in 195,000 additional premature deaths annually

The results from this hypothetical case study may be scaled to apply to specific policy initiatives affecting the U.S. coal-based electricity generation sector. For example, the U.S. Department of Energy’s Energy Information Administration (EIA) estimates that climate change bills currently before the U.S. Congress—such as Senate Amendment No. 2028, rejected by the Senate in 2003 and again in June 2005—could result in the displacement of up to 78% of U.S. coal-based electricity generation with higher-cost energy sources. The methodology employed here suggests that, absent any direct mitigation measures to offset expected decreases in employment and income, implementation of such measures could result in an annual increase of premature mortality rates by more than 150,000.

Background: Job, Income and Economic Impacts

The Penn State study (Rose, A.Z., and Wei, D., “The Economic Impact of Coal Utilization and Displacement in the Continental United States, 2015,” Pennsylvania State University, July 2006) found the following:

Assigning equal weight to each of the two energy price scenarios, we estimate that U.S. coal-fueled electric generation in 2015 will contribute:

• $1.05 trillion (2005 $) in gross economic output;
• $362 billion in annual household incomes, and
• 6.8 million jobs.

We also estimated the prospective net economic impacts of the “displacement” of coalfueled electricity generation at assumed levels of 66% and 33% from a projected 2015 base.

These levels of displacement are consistent with some of the potential impacts of major environmental policy initiatives in climate change or other areas. In these cases, we again calculated backward linkage and price differential effects to determine potential negative impacts on each state’s economy.

Additionally, we calculated potential positive economic benefits due to the operation of replacement electricity generation of various types. In all states, the net effect of displacing coal-based electricity was negative for the “high-price” scenarios, and in nearly all states, the net effect was negative for the “low-price” scenarios…

Assigning equal weight to the high- and low-price scenarios, we estimate the average impacts of displacing 66% of coal-fueled generation in 2015 at:

• $371 billion (2005 $) reduction in gross economic output;
• $142 billion reduction of annual household incomes; and
• 2.7 million job losses.

Assigning equal weight to the high- and low-price scenarios, we estimate the average impacts of displacing 33% of coal-based generation in 2015 at:

• $166 billion (2005 $) reduction in gross economic output;
• $64 billion reduction of annual household incomes; and
• 1.2 million job losses.