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November 27, 2007

Consumer choice and the eco-social "externalities" of coal (part one)

It is quite common for the end-user of a commodity to have no idea where the good was actually produced, never mind how it got from point A to point B. But some consumers might prefer to get their vegetables them from a local farmers’ market, instead of the supermarket. A person might want to support a business because they have received exceptional service there in the past; or, because they know the signature dish is made with the freshest local ingredients. The global commodities market has separated the consumer and the producer across both time and space. Goods can be shipped all the way around the globe and many can be stored away for future use/sale. When consumers do not see where the good is produced, how it is produced, and the byproducts of that production, they are less likely to have the knowledge that will alter their own spending habits. Not only that, but it may not be so easy to buy something even though it is all around you (as my search for locally-grown soybeans proved). Why does this matter? It all boils down to consumer choice. On one hand, the modern globalized economy consists of consumers that are primarily concerned with getting a given commodity for the best price possible. On the other hand, some may want to choose something other than the least expensive product - and that's where coal comes in.

There are increasing numbers of people who want to weigh other variables or 'social costs' such as the ecological sustainability of a good and the process of manufacturing it; the human rights records in the country where the good is produced or workplace health and safety records of the company making the product. The global economy lives and dies at the level of uncertainty a consumer will accept before choosing to not buy a good. Coal may be less expensive in terms of how much you pay every month for electricity, but those bills do not accurately reflect all of the electricity’s costs or, what economists call, “externalities,” like sulfur dioxide, mercury, carbon dioxide Externalities occur when neither the producer nor the consumer bear
all of the costs of an economic transaction and these costs are inimical to the provision of such 'public goods' as air, water, streetlights, and public safety.

As consumers, we are constantly being bombarded with choices that can challenge the strength and conviction of our beliefs. Most of the choices seem minute, but depending on how loud that little voice inside your head shouts, other choices may present some rather sticky cognitive dissonance at an uncomfortable level. Don't believe me? What is the first thing you think of when you are faced with the ubiquitous inquiry 'paper or plastic?' Concerned about the consequences of all that Styrofoam, do you calculate differences in total resource depletion when asked 'dine-in or carry-out?' Do you buy organic or conventional fruits and vegetables? always? why? why not? Do you buy your gas at Exxon/Mobil or BioWillie? Would you rather have a Budweiser or a Fat Tire? Do you prefer coffee from Starbucks, the coffee cart, or your French press? Would you rather go to to WAL-MART or AL-MART?(*) Would you choose fresh, crisp apples from New Zealand or last autumn's apples from upstate? Would you like bananas that were grown by a company that pays extortion money to violent crime syndicates? or would you rather have no bananas at all?

As electricity consumers, we have no way of determining exactly where the electricity that powers our homes and businesses is generated. Unless you live off the grid or you’ve got the ability to completely disconnect from the grid and generate your own electricity, you cannot distinguish between an electron generated from coal and one generated from wind, natural gas, solar, hydro, or any other source. We can determine the probability that our electricity is of a specific mix, but that is about it. Electricity consumers also often lack any specific knowledge of when electricity is expensive and when it is cheap; we generally know that electricity is more expensive in the morning and in the evening but most of us do not have the ability to monitor those price fluctuations and act accordingly. Fortunately, there is some hope in all of this, as barriers to markets are removed and electricity providers are held accountable for their externalities.

As the issues of energy use and its relationship to climate change are achieving greater acceptance among the general public, consumers want more control over how the energy they consume is produced and how they consume energy. People would be much more interested in the production cost of coal if they were paying the actual cost of coal-fired electricity. Energy generated from “traditional” fossil fuels is only cost-effective because the formula used to determine those costs omits too many of the social and ecological externalities of production...(to be continued).

(*) AL-MART is a small store located in Alma, CO (locals
at the South Park would remind me to tell you that Alma's elevation of 10,578 feet above sea level makes it the highest incorporated town in North America, despite what any other towns might claim).

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