ALEXANDRIA, Va., March 11, 2002 — If efforts to reduce the use of coal to generate electricity are successful, states such as Ohio and Missouri risk losing economic output, a new study shows.
The findings were included in a new study by a team of economists working at Pennsylvania State University.
The study, Projected Economic Impacts of U.S. Coal Production and Utilization, examined the impact of coal-generated electricity on state economies in the continental United States. The study found that coal-based electricity, including the production of coal, creates substantial benefits to the overall U.S. economy, especially in states like Ohio and Missouri.
However, the two states have much to lose if policies are implemented that lead to significant reductions in the use of coal to generate electricity. By forecasting the number of jobs and the amount of personal income and economic output that would be directly and indirectly attributable to electricity from coal in 2010, the study helps to define what is at stake.
Coal provides the fuel for nearly 90 percent of Ohio’s electricity, 82 percent of Missouri’s electricity, and more than half of the power consumed in the U.S.
The study projects that in 2010, if the use of coal for electricity generation were reduced by 80 percent and replaced by higher-priced natural gas, the impact on Ohio’s economy could be as follows:
* Up to 465,000 jobs could be lost (6.4 million jobs nationwide).
* As much as $16 billion in personal income could be lost ($224 billion nationwide).
* As much as $48 billion in economic output could be lost ($659 billion nationwide).
The impact on Missouri’s economy could be as follows:
* Up to 265,000 jobs could be lost (6.4 million jobs nationwide).
* As much as $8.6 billion in personal income could be lost ($224 billion nationwide).
* As much as $25 billion in economic output could be lost ($659 billion nationwide).
Because all businesses rely on electricity to produce and sell goods and services, the economic power of the electric utility industry extends far beyond the generation and sale of electricity. The study reflects the powerful ripple effects that coal-based electricity produces for the benefit of the U.S. economy.
The study was conducted by Dr. Adam Rose and Bo Yang, economists at Penn State. Dr. Rose is a professor and head of the Department of Energy, Environmental and Mineral Economics, and Yang is a graduate research assistant in the same department. Rose and Yang used certain economic assumptions to present their findings:
* They assumed varying levels of linkage between the coal-based electricity and other sectors of the economy – i.e., the degree to which coal-based electricity produces ripple effects that benefit other industries and sectors.
* They factored in the economic impact of using a higher-cost alternative fuel (in this case, natural gas) as a substitute for low-cost coal.
* They selected 2010 for their economic modeling because regulatory proposals aimed at displacing coal would need to be phased in over time.
Because reliance on coal as a fuel source for generating electricity varies from region to region, the economic benefits are not evenly spread across the nation. The economic advantages for coal-producing states are evident. More surprising, however, are the economic benefits realized by states that do not produce coal, but use it as a primary fuel for electricity generation, the study reported.
“This new analysis proves what we have known for a long time,” said Stephen L. Miller, president and CEO of the Center for Energy and Economic Development (CEED). “Electricity from coal provides economic empowerment to local communities, small business and working families.”
According to Miller, the study provides an additional level of details relative to the ongoing national energy policy debate. “Despite electricity from coal’s low cost and improving environmental performance, some special interest groups still believe we should abandon this abundant domestic energy resource. The Rose/Yang study provides additional empirical proof that coal- based electricity is an essential element of a balanced energy portfolio that increases energy security and provides economic empowerment for American families,” said Miller.
Dr. William Schaffer, professor and former chairman of the Department of Economics at Georgia Institute of Technology and one of the preeminent experts in state and regional input-output modeling, peer-reviewed the Rose/Yang study. According to Schaffer, the demand-driven multipliers used in the study are well tested in the literature and provide a solid estimate of the impact of coal on incomes in the rest of the economy. In his final peer review, Dr. Shaffer said, “The study represents an impressive and massive combination of data, analytic techniques, and modeling to address a large and significant problem. The authors are to be congratulated on their boldness in arriving at what seems to be a most reasonable impact statement.”
For a complete copy of the study or more information, visit www.CEEDNet.org or call 703/684-6292.
CEED is a national, non-profit organization that works at the regional, state, and local level to support balanced energy and environmental policies. CEED also provides leadership and support to the Americans for Balanced Energy Choices (ABEC) campaign. ABEC promotes a dialogue with community leaders across the nation on the need to balance America’s growing demand for electricity with the commitment to protect the environment.