December 10, 2000
An open Letter to Florida's Leaders:
Elizabeth Cairncross, environmental editor for the Economist magazine, has written, "Environmental resources, if not sustainably managed, may indeed limit economic growth....But everywhere mounting evidence suggests that bad environmental policies may carry real economic costs, measurable in terms of lost production, wasted investment, or reductions in the productivity of labor." This is not a new idea. (Costing The Earth, 1992, pp. 18-19.)
In order to be fully informed about the subject of environmental externalities with respect to the electricity generating business consider these points. I have written about externalities, but Cairncross suggests that "Environmental problems arise largely because the prices paid by people for goods and services do not fully reflect the costs that their provision, use, and disposal impose on the environment." (p.18.) Academic economist and consultant to the World Bank, Herman Daly, argues that externalties are a fundamental economic concept contributing to market failure. So important are the impacts on ecological conditions and geographical features that when too many externalities arise, the rational connection has been severed between economic models and physical existence.
To clarify an externality is any benefit or cost not covered in the payment for a good provided or service performed. Thus the exchange of money does not cover the true cost of the product or service purchased. There are externalities with respect to electricity generation. There are two forms of externalities concerning the generation and transmission of electricity: costs or deficits and benefits or positive returns on any economic exchange.
Our air, waters and places are all central to the lives we lead. Air, water, vegetation, wildlife and fisheries can be thought of in three distinct ways. They can be natural resources whose use inherently creates externalities. Second, they may be viewed as obstacles to development or a cost to overcome. Third, they may be understood as biological wealth; a foundation of economic prosperity.
A leading chemist, G. Tyler Miller, says, "energy is the thread sustaining and integrating all life and supporting all economics." To be fully informed about environmental externalities with reference utility markets, you must consider the facts, experience and weight of authority. Miller correctly suggests that "what type of energy we use and how we use them are major factors determining how much we abuse the life support systems for all species on earth." As basic economics and elementary science, Miller writes that "Our current dependence on nonrenewable fossil fuels is the primary cause of air and water pollution, land disruption and projected global warming." (Environmental Science, 1993, p. 380.) The price of fossil fuels ought to reflect the true, or life cycle costs of these carbonaceous fuels should reflect damages to people's health and the biological conditions of existence.
In treating nature as an external consideration to market transactions, benefits accrue and costs accumulate. In Florida, two natural benefits from electricity production are turtle conservation efforts by the nuclear facility in Stuart, and hot water effluent from other power plants that is used by manatees (Trichecus manatus) in the winter to keep warm. The negative externalities from electricity generation regularly exceed these benefits. Above ground power lines, exhaust gas emissions and solid waste in the form of spent nuclear fuel or fly ash from coal plants are examples of pollution as a negative externality or cost. There are more examples.
Air degradation from inefficient plants in the form of mercury, sulfur dioxide, nitrous oxide and carbon dioxide emissions all contribute to increased health risks to people with asthma, chronic bronchitis or emphysema. People die from air pollution in this state and our country every year. Acid rain damages car finishes, eats away at building facades and dissolves the limerock under your feet. Overhead wires are vulnerable to storm damage and pose a visual intrusion. These are all negative externalities from electricity production.
Please do not ignore these externalities because the costs involved are considerable. We can remedy the market tendency to under value damages to nature from energy use. But we can also save money. With reference to thrift, Miller reminds us that "Improvements in energy efficiency have saved the world $300 billion since 1973." You thus have a choice to be penny wise and promote energy efficiency and conservation or be pound foolish and not pay for the externalities.
The costs of asthma treatment and the loss of fisheries due to acid rain will not, however, go away. There is a cost of doing business in the natural world when generating, transmitting, or using electricity. Poor accounting may hide the cost for a time, but when the bill comes due, the aged, poor, weak and infirm pay in greater proportion for accounting mistakes than does the general population.
By choosing progressive legislative remedies that in some way include externalities you can better cover the costs of damaging land, air, and water, or health impairment caused by electricity production. Such damages may unintentionally undermine economic growth and should be taken into account because they drive up the actual costs of generating and distributing power.
Joseph V. Siry
Florida's Defeneders of the Environment