Study highlights ‘true cost’ of Thar coal

KARACHI: A recent study suggests that the external costs associated with Thar coal should be factored into the overall cost of power generation from this resource to accurately assess its true expense.

The study, titled ‘Externalities of Thar Coal’, was unveiled at an event organized by the Pakistan Research Institute for Equitable Development (PRIED) on Tuesday night.Thar coal, as the largest domestic fuel resource, is often promoted as an affordable local option for the future and is frequently presented as a cost-effective solution to Pakistan’s energy crisis. However, there are significant socio-environmental concerns related to coal.

The report aims to estimate the external costs associated with coal-fired power generation using Thar coal in District Thar, Sindh. It identifies and quantifies these externalities, which are borne by society and the environment rather than by investors or consumers.

The report notes that the current methods for determining energy tariffs for coal and other fuels typically include costs related to energy production, infrastructure investment, financing, transmission, distribution, consumer connections, fuel price adjustments, operation and maintenance, government subsidies, and taxes.

However, these calculations overlook several costs not directly incurred by investors, distributors, or consumers, but which impact society and the environment.For instance, public health issues faced by communities near power plants and coal mines; greenhouse gas emissions; toxic pollution; and water resource degradation are externalized costs that are not accounted for in the traditional pricing model. Such costs are borne by society and the environment instead of investors, power generators, or consumers far from Thar.

The report highlights that certain well-established external costs, such as the social cost of carbon -- which is updated annually -- are not reflected in the periodic cost adjustments. These are classified as externalities.

The focus of the report is on identifying these externalities related to coal mining and power generation from Thar coal. Specific areas examined include open-pit coal mining, post-mining landscape impacts, coal-fired power generation, coal transportation, and the decommissioning of power plants.