Life support for coal will make U.S. a backwater

Noah Smith
Noah Smith

In the run-up to World War I, German general Erich Ludendorff was said to have described his country's alliance with the decaying Austro-Hungarian empire as like being "shackled to a corpse." That phrase aptly describes the situation the U.S. will find itself in if it continues to bet on coal as the fuel of the future.

The coal industry is dying. The number of coal mining jobs in the U.S. plummeted in the 1980s and 1990s, paused for a while, then plunged again in recent years. Meanwhile, after decades of playing second fiddle to coal, natural gas has emerged as the nation's dominant method of generating electricity.

The change is global, not just in the U.S. China, by far the world's biggest user, is cutting its coal capacity by hundreds of millions of tons a year. India is canceling coal plants before they're ever built. BP Energy Outlook forecasts world coal use to start falling in the early 2030s.

Why is coal in decline? The obvious culprit is climate-change mitigation efforts. Governments around the world are worried that burning coal is accelerating global warming, and hence have acted to slow the threat.

In the U.S., many Republicans are climate-change skeptics. Some see the effort to reduce coal use as a needless government interference with legitimate business interests. Others, including President Donald Trump, see coal mining jobs as a traditional way of life — a symbol of masculine dignity and small-town vitality — and have promised to preserve that livelihood. Trump recently issued an executive order that lifts carbon-emission limits on power plants, authorizes the sale of coal from federal lands, and instructs government agencies not to worry about climate change. He is working to roll back the Obama administration's Clean Power Plan, an initiative designed to speed the transition from coal to renewable energy. Meanwhile, Ohio legislators are actually trying to increase subsidies for some coal-fired power plants.

This is a terrible idea. Despite the publicity and emotion of the battles over climate change, coal isn't on the wane because of environmental regulation. It's dying because it's an inferior technology whose time has come and gone. Trying to prop up this sunset industry might save a few jobs in West Virginia, but many more Americans in other industries and other parts of the country will be hurt.

A new study from the Stanford Institute for Economic Policy Research confirms this. Researcher Charles D. Kolstad takes a detailed look at recent developments in the coal industry, and examines a number of factors that might account for coal's decline -- environmental regulation, railroad deregulation, the development of hydraulic-fracturing (fracking) technology, automation and changes in financial markets.

Kolstad discovers that different factors have mattered at different times. Automation and other productivity improvements reduced coal employment in the mid-20th century, even as production levels were maintained. In the 1970s, rules intended to limit air pollution — not carbon dioxide, but sulfur that blackens the skies, causes acid rain and leads to lung diseases — were a factor, although many high-sulfur coal plants were granted exceptions from the rules.

More recently, though, natural gas has been replacing coal. Fracking, a technology many years in development, was broadly commercialized in the past decade. Fracking is estimated to have created about 1.7 million jobs in the U.S., and the cheap energy it provides has helped some companies bring manufacturing back from overseas. And now, with the construction of new facilities for storing and transporting gas around the world, natural gas promises to become an important export industry for the U.S.

Subsidies to prop up the coal industry will take a bite out of the thriving, growing natural gas industry. Meanwhile, loosening restrictions on carbon emissions might also hurt natural gas, since gas emits less carbon than coal does.

Meanwhile, giving coal subsidies and a free pass on carbon emissions could damage an even faster-expanding industry — solar. As is clear from the graph above, solar is still small but growing at a very fast rate. Already, solar installation jobs are an important source of employment for many Americans. And in the long run, solar promises to make energy cheap enough to fuel a sustained economic boom.

So the actions Trump and some Republicans are taking to try to keep the coal industry on life support also threaten to make the U.S. an energy backwater. Instead of betting on natural gas and solar, the fuels of today and tomorrow, Trump wants to force the country back to the fuel of yesterday.

Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.