The debate over energy subsidies ignited once again last week with a coal-producing state’s suggestion that Appalachian coal be subsidized so that it can be burned in power plants across the U.S. But this is not about a bailout, say the plan's supporters; rather, a coal state governor believes supplements should be paid to coal companies due to national security.
West Virginia’s Governor Jim Justice, in the name of terrorism, describes his “revolutionary” plan as crucial so that the U.S. power grid can continue to operate in the event natural gas pipelines are blown up. Gov. Justice said that as a safety measure, the federal government should pay $4.5 billion a year for power companies that continue to use coal.
"Keeping our Eastern coalfields and our miners working is critical to national security," said Gov. Justice in a public statement. "All it is going to take to shut the power grid down to the entire Eastern half of the country is a bomb being placed at a key natural gas pipeline or on a major highway artery to the West. Chaos would ensue, just look at the mayhem that took place in New York a few years back when the grid shutdown [sic] for a night. Think about what would happen if the power grid was shutdown [sic] for 60 to 90 days in the dead of winter. We could lose hundreds of thousands of people."
But Gov. Justice did admit that this subsidy would be necessary because even as regulations on the coal industry are rolled back, coal mining is still not competitive.
Justice’s plan suggests to a $15 subsidy for every ton of Appalachian coal burned. Bloomberg estimated that based on the amount of coal from the region burned during 2016, that would amount to the federal government paying $1.65 billion annually to prop up the industry. But the problem for Justice and his allies in the coal industry is that even though coal will still be part of the U.S. energy portfolio for many years, more of it is often sourced elsewhere.
Even as coal enjoys a slight uptick in consumption over the next few years, much of that harvested coal will come from states like Wyoming and Montana, where extracting coal is far more cost-efficient. Automation has also helped the coal industry stay relevant in recent years; subsidies are unlikely help bring back jobs. As Tim Loh of Bloomberg noted earlier this summer, "While coal companies are hiring again, executives are starting to search for workers who can crunch gigabytes of data or use a joystick to maneuver mining vehicles hundreds of miles away."
Opponents of clean energy subsidies have complained the government has no business “picking winners” and claim that incentives for clean technologies such as solar and wind power are the only reasons why they have become viable in recent years. Supporters of such programs counter that the boost in subsidies for renewables is a recent trend; in addition, fossil fuel subsidies are going to companies that are profitable anyway; and over the past century, the total amount of subsidies diverted to developing energy from fossil fuels and nuclear technology overwhelms recent incentives for solar and wind.
Furthermore, a contributor to Forbes earlier this year pointed out that the estimated $200 billion in costs for healthcare, lost labor productivity and damage to coastal areas are de facto subsides for energy companies as the government and consumers have been picking up those costs.
Justice, however, needs to find a way to keep the coal industry alive as most analysts agree that market forces will cause the sector to decline even more in the coming years. Exports to Europe and Asia have led to an increase in coal mining nationwide, and as a result, that helped West Virginia’s GDP grow 3 percent during the first quarter of this year, hence helping it become the second-fastest growing state in the nation. But economies overseas are also investing in alternative sources of energy such as clean energy, which means West Virginia’s leaders still need to develop a long-term strategy to diversify the state’s economy.
Image credit: Jim Justice/Flickr
Leon Kaye has written for TriplePundit since 2010, and became its Executive Editor in 2018. He's based in Fresno, CA, from where he happily explores California’s stellar Central Coast and the national parks in the Sierra Nevadas. He's worked an lived in South Korea, the United Arab Emirates and Uruguay, and has traveled to over 70 countries. He's an alum of the University of Maryland, Baltimore County and the University of Southern California.