Study Finds That Eliminating Use of Coal Would Yield Social Benefits

New research has found that phasing out the use of coal through the use of renewable energy would be good for the society. The study, which was carried out by researchers at the Imperial College School of Business, stated that the transition to green energy from coal would result in about $77.9 trillion in benefits for the society. These benefits include decreased harm to people’s health and individuals dealing with less fallout from climate change.

The investigators calculated the social benefit from phasing out coal and the cost of replacing coal with green energies to determine an approximation of the net gain to be obtained from the green energy transition. The net gain from the transition would be equal to roughly $78 trillion until the century’s end, which is equivalent to nearly 1.2% of the international GDP per annum during the period. This represents a net gain of $55 per every ton of avoided emissions from coal and about $125 per every ton of coal.

This research was coauthored by Professor Patrick Bolton of economics and finance from the Center for Climate Finance and Investment.

The scientists took account of the capital spending costs of setting up a green-energy capacity that’s equal to that of burning coal as well as the compensation for coal firms that will suffer economic loss, in order to determine the total cost of transitioning to the use of renewable energy.

The current social benefit value to be generated from the transition to the use of renewable resources is determined through the estimation of the volume of avoided coal emissions and by applying a price to said emissions. Bolton stated that the study discovered a great economic benefit from eliminating the use of coal, noting that their analysis had found that the gain from renewable energy investments exceeded the cost.

This study was initiated by University of Oxford’s Alissa M. Kleinnijenhuis of the Institute for New Economic Thinking and the Stanford Institute for Economic Policy Research as well as IMF’s Tobias Adrian.

Adrian, the director of the monetary and capital markets department at IMF as well as a financial counselor, stated that the study’s analysis had demonstrated that the economic benefits of phasing out coal were notable enough to continue calling for international agreements that would unbridle the power of the capital markets. He added that phasing out the use of coal would also help limit the increase in global temperature to 1.5o C.

While the prevailing consensus is that coal needs to be phased out, the extractors of this commodity, including Peabody Energy Corporation (NYSE: BTU), are seeing increased demand for coal due to the ongoing energy crisis around the world.

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