As far as I remember (but it is a while ago that I read that paper), the paper I linked to does not include CO2 externalities but focuses on the effects of local air pollution on the United States itself. So no, if anything the negative externalities derived in the paper are too low, and net value added would be even lower if climate change was taken into account. What is your criticism of how the benefits of the industries are calculated?
For all values of the social cost of carbon, emissions of CO2 have the largest percent impact on the damages from natural gas–fired power plants (40 percent to 90 percent). This is because natural gas–fired power plants generate very small amounts of the local pollutants. In contrast, the CO2 share of GED* for both coalfired and oil-fired power generators is between 5 percent and 40 percent. Although coal-fired plants generate a great deal of CO2, they generate greater damages due to other pollutants
So it does go into CO2.
As for the Value Added, they seem to be using the straightforward economic value of the industries in question, which omit positive externalities just as much as they omit negative externalities.
Positive externalities is a bit of an odd way to phrase it—if it’s just counting up the economic value (i.e. price) of the fossil fuels, doesn’t it also disregard the consumer surplus? In other words, they’ve demonstrated that the negative externalities of pollution outweigh the value added on the margin, but if we were to radically decrease our usage of fossil fuels then the cost of energy (especially for certain uses with no good substitute, as you discussed above) would go way up, and the tradeoff on the margin would look very different.
Yes, the statement that switching off coal-fired power plants etc. is only true at the margin. However, for the OP’s question, it seems that the sign of “marginal social benefit—marginal social cost” seems crucial.
Yes, I misremembered—but the CO2-based calculation is not driving the main results; instead, it is an extension calculated for one sector (electric power generation). See these two paragraphs from the introduction:
“We then turn to the estimation of damages by industry. We find that the ratio of GED/VA is greater than one for seven industries (stone quarrying, solid waste incineration, sewage treatment plants, oil- and coal-fired power plants, marinas, and petroleum-coal product manufacturing). This indicates that the air pollution damages from these industries are greater than their net contribution to output. Several other industries also have high GED/VA ratios. We also present the overall size of GED by industry. Five industries stand out as large air polluters: coal-fired power plants, crop production, truck transportation, livestock production, and highway- street-bridge construction. In order to explore the robustness of our results to certain assumptions in the integrated assessment model, we conduct a sensitivity analysis. The analysis shows that the level of GED is sensitive to assumptions about the value of mortality risks, how this value varies by age, and the adult mortality dose-response function for particulate matter. A final analysis examines the fossil fuel electric generating industry in detail. It presents a more detailed calculation of GED for coal-fired power plants and it includes the impact of carbon dioxide (CO 2).”
The 184 bn $ (in 2011) do not include CO2 (see first paragraph of section B)
Concerning positive externalities: Yes, the authors note that this is not part of the calculation. But it is completely unclear what the relevance of this is. Every economic action may have a positive externality, but why exactly should this favor fossil energy sources in particular? And why should I assume these externalities to be so large that they are relevant=
As far as I remember (but it is a while ago that I read that paper), the paper I linked to does not include CO2 externalities but focuses on the effects of local air pollution on the United States itself. So no, if anything the negative externalities derived in the paper are too low, and net value added would be even lower if climate change was taken into account. What is your criticism of how the benefits of the industries are calculated?
From the paper you linked to:
So it does go into CO2.
As for the Value Added, they seem to be using the straightforward economic value of the industries in question, which omit positive externalities just as much as they omit negative externalities.
Positive externalities is a bit of an odd way to phrase it—if it’s just counting up the economic value (i.e. price) of the fossil fuels, doesn’t it also disregard the consumer surplus? In other words, they’ve demonstrated that the negative externalities of pollution outweigh the value added on the margin, but if we were to radically decrease our usage of fossil fuels then the cost of energy (especially for certain uses with no good substitute, as you discussed above) would go way up, and the tradeoff on the margin would look very different.
Yes, the statement that switching off coal-fired power plants etc. is only true at the margin. However, for the OP’s question, it seems that the sign of “marginal social benefit—marginal social cost” seems crucial.
Yes, I misremembered—but the CO2-based calculation is not driving the main results; instead, it is an extension calculated for one sector (electric power generation). See these two paragraphs from the introduction:
The 184 bn $ (in 2011) do not include CO2 (see first paragraph of section B)
Concerning positive externalities: Yes, the authors note that this is not part of the calculation. But it is completely unclear what the relevance of this is. Every economic action may have a positive externality, but why exactly should this favor fossil energy sources in particular? And why should I assume these externalities to be so large that they are relevant=