Wednesday, November 14, 2007

Coal and Carbon Offsets

Since I didn't have a good source of information about the price of coal, I didn't include it in my last article comparing fuel costs, although I did mention it as one reason electricity is relatively cheap.

After some research, I've discovered it is even cheaper than I thought, at about $2 per million BTU, or one quarter the cost of the cheapest alternatives quoted in that article. That is some pretty powerful incentive to use coal, and in fact there are plans to build about 1000 coal fired power plants worldwide within the next year.

But, I can hear the screams now...Coal is dirty!!! Al Gore has recently stated that we should allow no more coal power plants to be built unless the carbon is sequestered underground. Global warming supporters identify coal as one of the main culprits in the crisis. The same article which quoted the price of coal mentioned above, indicated that it is only cheap because the environmental effects are not priced into the coal.

I'll admit there is some truth built into all these positions. Coal does have more carbon than other sources and therefore will generate more carbon dioxide when burned. But, eliminating coal as an energy source would substantially complicate the energy supply/demand balance, possibly leading to a severe recession. So, always the analyst, that got me to wondering if the effects could be quantified, and if so, how it would effect the equation. And that led me to thinking about another topic that is much in the news these days, carbon offsets. Various politicians, celebrities and presidential candidates, of course, have recently salvaged their green reputations by buying carbon offsets to compensate for their large carbon footprint.

Is it possible to resolve these two great issues of the day (energy supply and global warming) with a single stone, carbon offsets? Surely it would be ruinously expensive, right? It was worth a look. The answer, if you believe the hype and follow it to its ultimate conclusion, is, yes, the problem is easily solved!

I went to several sites that sell carbon offsets and found that I can buy carbon offsets for about $10-14 per ton. That would mean that offsetting the global warming effect would cost less than the value of the coal, meaning coal is still less than half the cost of other fuels. Voila, we solved the energy crisis and global warming without a major hit to the economy. We just mine our nearly endless supply of coal and buy offsets for the carbon.

Ok, I suspect that others, like myself, may smell a rat here, but the numbers are clear. Can it be that those who sell carbon offsets cannot (and do not)really offset the carbon for the quoted price? Surely our politicians wouldn't be sucked into the hype unless it was true, or worse, try to scam us into believing the hype for their own benefit? Or, is the environmental issue with coal less than generally thought?

I'll call on my readers to answer the questions or sniff out the rat, but either way, I think the exercise is illuminative.

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