Alvin L. Alm - Coal Myths and Environmental Realities: Industrial Fuel-Use Decisions in a Time of Change

Coal Myths and Environmental Realities

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Coal Myths and Environmental Realities: Industrial Fuel-Use Decisions in a Time of Change

Alvin L. Alm
with Joan P. Curhan

This book deals with two inconsistent myths that persistently surround industrial use of coal. The first myth is that the Clean Air Act precluded the use of coal; the second, that industrial use of coal will expand rapidly as a result of purely economic choices.

Through analyzing fuel-use decisions actually made by industry, Mr. Alm concludes that environmental quality standards have played a minor role in industrial choice of fuel. Historically, natural gas and oil have been both less costly and more convenient fuels for industry to use. Coal gained a substantial economic advantage over oil after the oil price increases of the last decade, yet it continues to maintain a lower market share than economics alone would suggest. Mr. Alm demonstrates that coal's share of the fuel market will continue to remain low because of the way U.S. businesses view fuel-use choices. For most U.S. firms, energy costs are a relatively small portion of total costs and a minor factor in a firm's ability to compete. Faced with alternative capital projects to expand production facilities or to make mandatory investments, companies do not generally give high priority to coal conversion projects. Moreover, most U.S. firms have little experience with burning coal, and that lack of expertise creates additional psychological and institutional barriers to coal's use. Finally, there is a tendency to prefer high-payoff, short-term investments over projects that promise cost savings many years in the future. These are all strong reasons for coal's lackluster performance in the industrial marketmuch more potent forces than environmental regulations.

Alvin L. Alm is now Deputy Administrator of the Environmental Protection Agency. This book was written when he was Director of Harvard University's Energy Security Program at the Energy and Environmental Policy Center and a lecturer, at the John F. Kennedy School of Government at Harvard. Mr. Alm is co-editor of Oil Shock: Policy Response and Implementation (forthcoming).

Joan P. Curhan is Research Administrator at the Energy and Environmental Policy Center, Harvard University. Previously, she was Research Administrator of the Multinational Enterprise Project at the Harvard Business School. In connection with this project, she coauthored three books-- Tracing the Multinationals (1977), The World's Multinational Enterprises (1973), and The Making of a Multinational Enterprise (1969).

Alvin L. Alm
with Joan P. Curhan

TO
MINNIE AND EMIL ALM
with deep appreciation
and
MURIEL AND DAVID POKROSS
with much love and thanks
for years of encouragement and caring

First published 1984 by Westview Press, Inc.

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Library of Congress Cataloging in Publication Data
Alm, Alvin L.
Coal myths and environmental realities.
(Westview special studies in natural resources and energy management).
Includes index.
1. Coal trade--Government policy--United States. 2. United States--Industries--Power supply--Decision making. 3. Fossil fuels--Environmental aspects--United States. 4. Fossil fuels--United States--Costs. 5. Air--Pollution--Law and legislation--United States.
I. Curhan, Joan P. II. Title. III. Series.
HD9546.A45 1984 333.8'22'0973 83-16940
ISBN 13: 978-0-367-01539-8 (hbk)

This book was written while I was a lecturer and director of the Harvard Energy Security Program at the John F. Kennedy School of Government. Like any book prepared during a period of rapidly developing scientific investigation and evolving public policy concerns, the book is silent on the controversies surrounding the latest environmental issues. For example, I have not addressed here the impact of potential policy changes to cope with acid rain deposition. Rather the purpose of the research was to examine the role that environmental regulations have played to date in influencing industrial fuel-use decisions with special attention to the opportunities for increased utilization of coal. The examination of retrospective cases would provide an improved empirical foundation for evaluation of future policy proposals.

The book is short, but the research in pulling together ten case studies and conducting numerous interviews was extensive. Although we began with no particular bias or point of view, the conclusionthat environmental requirements have played a small role in industrial fuel-use decisionmakingwas surprising to the researchers who worked on the project. Indeed, the conclusion seemed contrary to the conventional wisdom. To assure accuracy, we twice sent copies of the report to all the industry participants. To satisfy myself on the report's conclusions, I talked to many friends in industry and presented the results to colleagues at Harvard and before other forums. My colleagues at Harvard urged that the book be published because they see in it a contribution to our understanding of industrial fuel-use decisionmaking processes.