Can Changes to US Energy Policy Save the Coal Industry?

Throughout the 2016 Presidential election campaign, Donald Trump emphasized the revival of the coal industry as a major platform pillar. Yet nearly three years after winning the electoral college, the coal industry’s fortunes are still looking grim. Trump frequently speaks of his accomplishment in reviving coal, but the industry has yet to reverse its downward trend. The aggressive deregulation that has followed since 2016 hasn’t provided the support to the industry the Republican party guaranteed. So, is there any chance of restoring the industry, or is the pledge to revive coal yet another facade to American voters with pent up economic anxiety?
The declining production of American coal has long been a trend. According to the U.S. Energy Information Administration, coal has been losing market share since 1988. Largely, this can be attributed to creative destruction, a component of capitalism. In a capitalist system, older, less efficient products are replaced with newer versions. There are several factors as to why coal has seen a three-decade-long decline.
The most notable factor has been the rise of alternative energy sources. Natural gas has increased its market share primarily at the expense of coal. The massive boom in shale gas production across the United States has dramatically reduced the price of gas. Subsequently, this has undercut coals primary attribute: its cheapness. In recent years, the booming innovation surrounding the renewable energy sector has also led to a drop in green energy prices. Combine the cheapening of alternative energy with the increasing age of the American coal fleet, and it’s no surprise coal is losing out. The average age of coal plants across the United States is around 40 years old. This is significantly older than most natural gas plants and all major renewable energy installments. As the coal fleet has aged, mechanical breakdowns and other issues associated with operational capabilities have increased. The efficiency of most coal plants is also well below the optimal rate. To remedy this growing problem, repairs would need to be conducted on a massive scale for many of the largest coal plants across the country. There is little economic incentive to pay for these upgrades though, as the industry has been declining for decades, with stock prices dropping significantly. Projections show that production levels are likely to continue to decrease.
The coal industry’s fall from grace has, for a long time, been cushioned by the growing American demand for electricity. In more recent years, however, electricity demand has stagnated. Record warm winters have also had adverse effects on the demand for coal. As one of the most polluting energy sources in the world, coal has contributed significantly to the warming climate, which ironically, is now hurting the industry’s profits.
The coal industry may be unable to return to the height of its glory days, but there are certain policy changes which could help delay the inevitable. The Trump administration, in repealing Obama’s signature Clean Power Plan (CPP), is aiming to do just that. The Obama-era policy required states to meet specific standards on reducing emissions. If they failed to meet the standards, the Environmental Protection Agency (EPA) would step in and impose its own. Requiring states to reduce emissions created a salient target on the coal industry’s back. Repealing the Clean Power Plan has resulted in a lessening of incentives for States to move away from coal. Expanding American coal exports into the Asian energy market could also provide a boost to the industry. While domestic consumption will likely continue to decline (regardless of the CPP repeal), the Asian market is still heavily reliant on coal to meet rising energy demands. Environmental protection in Asian countries is also not as stringent as North America, providing the perfect set of circumstances for coal to be a primary energy source. Finally, additional subsidies and tax exemptions could help encourage expanded production. Though, it’s worth noting the United States already heavily subsidies fossil fuels to the tune of billions of dollars annually.
While policy changes do have the potential to slow the demise of the coal industry, a full revival is seemingly impossible. Implementing all of the necessary changes to keep coal afloat would also prove difficult due to rising public opposition. Loyalty to fossil fuels has waned in recent years, as climate change and healthcare have become more impactful issues for voters. The change in public support has resulted in a growing political will to eliminate coal as an energy source altogether. The evolving public attitude on energy issues does not bode well for coal, regardless of the industry’s attempts to convince the public of the potential for it to be a clean source of fuel. Carbon capture and storage technology is often touted by the industry as an investment that allows both significant coal burning, and meaningful carbon emission reductions. Yet, this technology is largely untested, lacks any distribution plan, and falls squarely into the fallacy of scientific supremacy. Even if the technology has potential, the lack of development into it means that commercialization is far off. Relying on a solution so distant in the future is impractical, and unlikely to sway many American’s minds.
The United States may have a handful of tools left to prolong coals usage; however, doing so would be a mistake. Subsidies, tax exemptions, increased exports and deregulation would only act as short term industry benefits. In the long run, capitalism will naturally eliminate coal as a source of fuel. There is no reason, other than for ideological purposes, to fight the evolution of energy sources. Embracing a forward-thinking attitude on energy policy is critical, as the use of coal is dangerous to both the American population and the world. Unfortunately, the endless stream of donations into Republican coffers on behalf of fossil fuel industry lobbyists is likely to stifle any forward-thinking energy policy in the current administration. Donald Trump and the Republican party can claim that coal has been revived all they want, but the markets will have the last laugh.

Published by Brett Porter

Comms. guy with a passion for public policy and responsible corporate governance. Conservation advocate. Plant person.

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