When Markets Fail

From Economist:
...That's real coal prices over time (source, PDF). There's no real magic going on here; coal is just a simple technology, and firms have gotten very good at blasting the stuff out of the ground. As a result, real coal prices have fallen, which means that it hasn't been enough for alternative energy technologies to get cheaper (and they have gotten much cheaper); they would have needed to have gotten cheaper faster than coal in order to take a lot of market share from coal technologies.

Of course, what you're not seeing in the above chart are many of the other costs associated with coal energy generation. The practice of blowing the top off of mountains to mine coal produces cheap power, but causes a lot of damage to local environments and a lot of health problems for people near mining operations. Similarly, people living in close to coal power stations suffer deleterious health effects. And of course, there is the cost of carbon emissions associated with coal power.

In other words, coal dependence has continued largely because coal has remained so cheap, and coal has remained cheap because society has not forced mining operations and power companies to internalise the costs of the environmental, economic, and health damage associated with coal into the price. Coal continues to dominate simply because the market doesn't reflect social costs. That's not a problem with renewables. That's a problem of economics and of governance."
http://www.economist.com/blogs/freeexchange/2010/02/energy_transition

TW: Folks can debate what the negative externalities with coal are and how much they should be priced. But that modern economics and hence the market price does not reflect many of them is not really debatable. My stance on energy is figure out how to integrate the cost of negative externalities then compare the prices. Those who oppose climate legislation due to their "costs" are missing "costs" (i.e. via the negative externalities) that are already there but just not so transparent because they are not reflected in current market pricing. Economics and markets are imperfect to assume otherwise leads to bad decision making.