Estimating external costs from extraction of Southern Appalachian coal: the possibilities of using an income-regional multiplier approach
If an economic activity, such as coal mining, emits pollutants that harm other income-producing assets, the present value of these affected assets will diminish in direct proportion to the loss in income flow. Should the economic system not force the polluter to fully reimburse the owner of the affected asset, the loss in asset present value represents an external cost. Attempting to measure the magnitude of such external costs, as they occur in the real world, involves measuring either the loss in present value of an affected asset or measuring the loss in income flowing from the affected asset. There are extreme difficulties in using the asset value approach. Besides the usual problems in gathering usable data, the determination of asset values depends on several variables. Sorting out the cause-and-effect relationships of the many variables on the asset value can easily become a statistical impossibility. Measuring the loss in income flows from affected assets can also lead the investigator down a dead end, but there is the chance that it may succeed where the asset value approach has already failed. The prime advantage of the income-measurement approach to the estimation of external costs from coal mining in Southern Appalachia is that the data required have, to a great degree, been generated by the BEA and the Bureau of Mines. But some additional data needed is not readily available. Certain problems (such as loss and nonlinearities) in using the available data exist and certain questionable economic assumptions are involved, so that the value of the approach is not yet known. (LTN)
- Research Organization:
- Tennessee Univ., Knoxville (USA). Appalachian Resources Project
- OSTI ID:
- 5417929
- Report Number(s):
- ARP-14
- Country of Publication:
- United States
- Language:
- English
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