The real (and unaccounted) costs of coal power

Johan Fourie is associate professor in economics at Stellenbosch University.
Johan Fourie is associate professor in economics at Stellenbosch University.

On 25 July, the highest-ever temperature was recorded in Paris. The 42.6 °C measured comfortably beat the previous record of 40.4 °C of July 1947. The heatwave hit much of the rest of Europe too. Highest-ever temperatures were recorded in Germany, the Netherlands, UK and Norway during the last week of July.

The extraordinary temperatures in Europe should come as no surprise to those who have followed scientists’ predictions about climate change. The rapid industrialisation in Western Europe and North America since the mid-nineteenth century, and in most parts of the world since the mid-twentieth century, has made humans the main culprits in a warming world where temperatures are rising at an unprecedented rate.

There are many consequences of a warmer planet. Nasa’s website mentions, to name a few, warming oceans, shrinking ice sheets, glacial retreats, sea level rise, ocean acidification and a greater likelihood of extreme events.

But rising temperatures are also likely to have severe economic costs.

The problem for economists has been to quantify the size of these costs; if we could measure the costs of pollution accurately, it would allow us to determine how much we would be willing to spend to prevent said pollution. But measuring the costs of pollution, or any environmental damage for that matter, is hard, because the effect is usually not limited to one territory or even country.

Economic historians, in particular, have joined the debate, using historical environmental shocks to measure a variety of consequences for standards of living. England was the first to industrialise in the nineteenth century, with the new cities of Liverpool and Manchester filled with air-polluting coal-fired power plants.

In a new article in the Journal of Economic History, three economic historians exploit the variation in pollution at district level to test the effect on the living standards of children born during the time of peak industrialisation.

They use the heights of soldiers that enlisted in World War I and trace them to the places they were born. They compare the heights of these young men to the quality of the air in the districts they were born, finding that children born in districts with high coal intensity were also likely to be much shorter adults when they enlisted in the Great War. Pollution clearly resulted in substantial stunting of children – and the size of this negative health shock can now be quantified.

Another example comes with the spread of one of the deadliest pandemics in history: the Spanish Influenza of 1918. Although many scholars have investigated the causes and consequences of the Spanish flu, a new paper, also published in the Journal of Economic History, shows that the effects of the pandemic were exacerbated by the high level of air pollution in many rapidly growing cities. “Cities that used more coal experienced tens of thousands of excess deaths in 1918 relative to cities that used less coal with similar pre-pandemic socioeconomic conditions and baseline health.”

Pollution spread diseases faster and with greater intensity.

Air pollution also affects the health of the environment that humans rely on for their food. To measure this, economic historian Keith Meyers, in a third paper in the same journal, reports the effects on agricultural production of nuclear tests that the US conducted in the 1950s.

Although the nuclear tests were limited to the Nevada Test Site, the radioactive fallout spread across hundreds of miles, including the agricultural heartland of the Plains and Midwestern states. The impact on agriculture was massive. Meyers measures that the average corn farmer lost approximately $3 658. “To put this value into perspective, the average price paid for a 20-horsepower tractor in 1945 was $922. In 1946, the average US farm earned $4 330 in gross income, and the average annual operating cost of a farm 1946 was $2 289.”

Gross income for these farmers would have almost been double without the nuclear tests. And that counts only the loss in production of crop farming. The fallout also affected animal and human health directly. As Meyer concludes: “Much of the radioactive material studied in this article entered the food supply and was subsequently consumed by millions of people.”

To show how big the discrepancy is between the actual and estimated cost of pollution, consider that since 1990, the US government has paid out $2bn in compensation to victims of the fallout that live directly ‘downwind’ of the nuclear test site.

Meyers’ research shows that the victims of the nuclear tests were far more numerate. “I find that radioactive pollution depositing far beyond the compensation region had substantial effects on agricultural output over a 20-year period and the value of these losses dwarf the amount of compensation the US government has paid to some victims of nuclear testing.”

These three historical studies have very real implications for SA today.

In 2018, Greenpeace reported that Mpumalanga has some of the highest rates of air pollution in the world. Anyone who lives in eMalahleni would agree; there are even fog warning signs as you drive on the N4. While the delays and financial cost overruns of Medupi and Kusile have been much documented – the reason we might soon see the International Monetary Fund on our doorstep – the largest cost of these coal plants remains hidden in the ill health of future generations.

This article originally appeared in the 29 August edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.

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