Energy Research Institution Calls for Internalization of Externalized Coal Costs

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The Center for Energy, Ecology, and Development (CEED), an independent, non-profit, non-stock, think-do institution engaged in issues of the environment, energy, and development in the Philippines, called attention to a newly published report by the Institute for Energy Economics and Financial Analysis (IEEFA) and the Institute for Climate and Sustainable Cities (ICSC), whose findings emphasized that “existing and future coal plants in the country are a losing gamble for all Filipinos.”

According to CEED, the study, called “Carving Out Coal in the Philippines: Stranded Coal Plant Assets and the Energy Transition,” poses urgent energy policy and investment questions in its highlight of the reality that all coal plants are projected to become stranded assets.

“Along with the deflation of natural gas and renewable energy costs and the widening scope of the Retail Competition and Open Access scheme, the study notedly points out historically ignored and externalized costs of coal to be a main contributor to coal’s future as a stranded asset,” said CEED Research, Policy and Advocacy Officer Arvin Buenaagua.

“These hidden, externalized costs — which are present all throughout the life cycle of coal — are not all reflected in ratepayer bills, but are always inevitably shouldered by coal-affected sectors and the general public,” says Buenaagua.

“The study’s conclusion states that governments worldwide, upon findings of these externalized costs, adopt policies to price these costs in, resulting to changes in the energy market that put coal at the risk of being a stranded asset,” Buenaagua continues.

According to Buenaagua, this means that when all the costs of coal-generated power are factored in its pricing, coal is rendered an expensive and obsolete energy source — especially in the face of rising renewable energy sources whose prices are increasingly competing with that of coal.

“This pricing in or internalization of coal’s externalized costs then becomes an important guide for energy policymakers, investors, and energy consumers in their dealings with coal-sourced energy,” claims CEED Legal Research and Policy Officer Avril De Torres.

“But so far, there exists few initiatives in the country to bring to fore and lay out the actual prices of the external costs of coal,” says De Torres.

De Torres references a report published in the Annals of the New York Academy of Sciences, dating back to February 2011 entitled, “Mining Coal, Mounting Costs: the Life Cycle Consequences of Coal.”

De Torres quotes the report which revealed that accounting for the economic, health and environmental costs associated with each stage in the life cycle of coal reveals coal’s cost to be between $175 billion and $500 billion dollars annually.

According to De Torres, these costs are stated by the study to be shouldered by the public at large. She highlights one such instance in the case of coal’s externalized costs on Philippine air and water resources. She cites a number of coal-affected and coal-targeted communities, like that of San Isidro, Palawan, that have filed legal actions and launched campaigns against the establishment of coal-fired power plants in their areas, due to the severe air and water pollution caused by these coal plants.

De Torres refers to coal-affected communities’ quoted Harvard study, conducted in the Philippines, that found an annual estimate of 2,410 deaths as a consequence of exposure to pollution emitted by coal plants. She states that the study found residents of host communities often suffer from lung, cardiovascular, and skin diseases.

De Torres further states that due to soil and water contamination from coal mining and coal plant chemicals, residents’ livelihood are destroyed. She cites the case of fisherfolks residing in Antique, the province hosting Semirara Mining and Power Corporation’s coal mining operations, whose seaweed farming and fishing activities have suffered due to coal-caused water contamination.

“The lack of public attention to these externalized costs results to our government issuing lax policies on the further establishment of coal plants and investors continuously funneling money to a coal industry that is economically at-risk,” says De Torres.

Buenaagua cites the case of Meralco’s seven Power Supply Agreements pending for approval by the Energy Regulatory Commission, which are currently criticized by environmental groups and coal-affected communities for being mired in procedural irregularities and for compelling the further establishment and expansion of coal plants in the country.

He also cites the case of continued coal financing of major banking institutions like the Bank of the Philippine Islands which have been criticized by civil society organizations for utilizing its depositors’ money to invest in an economically failing coal industry.

“There is a discord between the threats that coal poses for the country’s economic, social, and environmental future and the leniency of our government and this country’s key power players towards coal industries,” says Buenaagua.

“If this continues, coal-affected communities and our environment, the ones hit hardest by coal’s externalized social, health, and economic costs, will be continuously forced to shoulder these costs,” he warns.

According to De Torres, policymakers and investors should heed the signals of reports such as that of ICSC and IEEFA.

“Studies on the trend of energy sources implore that we abandon coal and tap into the expanding potential of renewable energy sources. This means addressing head-on the reality of coal’s many hidden costs and firmly deciding on making the proper transition towards renewable energy,” concludes De Torres.