Long-term Cost for Coal Energy Is Too High

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Arkansas Chamber of Commerce President Randy Zook published a column in the Nov. 14 Arkansas Democrat-Gazette concluding that the Environmental Protection Agency's plan to reduce greenhouse-gas emissions from power plants would be "near-catastrophic" for Arkansas and arguing on economic grounds for continued primary reliance on coal and natural gas. His argument shockingly lacks any mention of the climate change crisis looming over all energy-related decisions. Even within the narrow realm of Arkansas' economy, it demonstrates provincial tunnel vision.

It's the consensus of knowledgeable scientists that climate change is real, increasingly devastating and caused primarily by humans. Denial of this conclusion is akin to denying the scientific basis upon which most modern progress rests.

Let's just focus on the economic aspects Mr. Zook considers so crucial.

In 2008, Gov. Mike Beebe appointed 21 industrialists, environmentalists and teachers, including me, to a commission to study climate change. We succeeded in putting together a report recommending over 50 specific steps Arkansas could take to help solve this problem. The Legislature discussed many of these, and some became law. To find the report, search on Arkansas Governor's Commission on Global Warming.

The commission's hottest topic was the coal plant planned by Southwestern Electric Power Co. in Fulton, Arkansas. I proposed that the plant not be built unless its carbon dioxide emissions could be pumped safely underground. Otherwise, the energy should come instead from efficiency, renewables and, as a last resort, natural gas. Although all eight of the commission's industrial leaders, including the then-president of the Arkansas Chamber of Commerce, voted against the proposal, it was approved by the commission on an 11 to 10 vote. With such solid industry opposition, the Legislature never considered the proposal.

One reason for supporting this proposal was economic. It was obvious that climate change would soon force the nation into just the kinds of rulings that have come recently from the EPA. In fact, Arkansas Public Service Commission member David Newbern made the same argument in his dissenting opinion from the APSC's 2-to-1 decision that permitted the construction of the Fulton plant. Newbern, and our commission, nixed the plant precisely because coal plants would probably soon become expensive or outlawed on environmental grounds.

Now, as predicted, those chickens have come home to roost, upsetting Zook and others who were so keen on coal. Arkansas gets 55 percent of its electricity from coal, a foolish over-investment. Thus, EPA wisely proposes a 44 percent reduction of our carbon emissions by 2030, considerably more than the 30 percent average proposed nationally.

Although Zook and others recommend more of the same bad medicine, forward-looking business leaders know better. Henry Paulson, treasury secretary under George Bush, in a cooperative proposal with former New York City Mayor Michael Bloomberg, argues that climate change is indeed a catastrophe, and that "the solution can be a fundamentally conservative one that will empower the marketplace to find the most efficient response. We can do this by putting a price on emission of carbon dioxide--a carbon tax."

Smart business thinking has for years taken a similar approach. In 2006, Sir Nicholas Stern, economic adviser to the British prime minister, presented a ground-breaking analysis showing that climate change would cost the world between 5 and 20 percent of annual global GDP under business as usual, but that if we began right away (in 2006) to fix the problem, it would cost only 1 percent of annual global GDP. According to Stern, "climate change is a result of the greatest market failure the world has seen ... the sooner we act, the lower the risk and cost."

George Shultz, Treasury secretary under Richard Nixon and secretary of State under Ronald Reagan, says, "the big ice sheets are melting; something's happening." He, along with Paulson, Bloomberg and Robert Rubin, banker and secretary of Treasury under President Clinton, are helping sound the alarm.

Rubin said, "I believe that investors should insist that companies disclose their risks, including the value of assets that could be stranded." He was referring to trillions of dollars of assets at risk of being rendered obsolete, including vast coal and oil deposits that must be left in the ground to prevent carbon dioxide emissions.

Recently, 350 global institutional investors representing $24 trillion in assets called on government leaders to provide economically meaningful carbon pricing to redirect investment to deal with climate change and to phase out fossil fuel subsidies.

There will be a price on carbon. Mr. Zook and others need to wake up to today's economic realities.

ART HOBSON IS A PROFESSOR EMERITUS OF PHYSICS AT THE UNIVERSITY OF ARKANSAS.

Commentary on 11/21/2014

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