“Picking winners” doesn’t look so bad when you’re losing.
The US coal industry is dying — but not with any dignity. As the end approaches, its sense of aggrieved entitlement is increasingly naked, its demands for government handouts increasingly frantic. As dread builds, shame has left the building.
The story of coal’s decline has been told many times now (see this post for more), but at root, it’s not complicated: The industry’s product is outmoded.
Natural gas and wind power are cheaper than coal power in most places, and solar power is heading the same direction. What’s more, wind and solar (variable renewable energy, or VRE) and natural gas complement each other. VRE is completely clean but variable. Natural gas is moderately clean but flexible. Variable and flexible work well together; they are the basis for the modern grid. (Whether we can find equally flexible but entirely clean alternatives to natural gas in the coming decades is the most pressing issue facing the grid.)
Giant, slow, inflexible, dirty coal plants simply don’t fit in that picture. Coal still represents 30 percent of the US electricity mix, but as natural gas and renewables grow and the grid evolves toward a flexible, distributed model, its role will inevitably shrink.
There’s no big conspiracy, no “war on coal,” just the creative destruction of capitalism at work, as technological advances and evolving social preferences transform industries. Without creative destruction, capitalism doesn’t work — productivity and wages don’t grow. But there is no creative destruction without pain for the workers and communities on the losing end. That’s why capitalist societies need a foundation of public services (upon Matt Bruenig’s sage advice, I’m no longer using the term “safety net”). It cushions the turbulence of creative destruction.
Many members of the US business community, particularly those of a more conservative bent, like to talk about the virtues of meritocratic free markets. So do their allies in elected office.
But just as there are alleged to be no atheists in foxholes, there are no free marketeers in dying industries.
Which brings us back to the US coal industry. It is instructive, as coal mining companies go bankrupt and coal plants shut down, to watch as industry leaders vigorously shed their purported free market principles in support of public assistance. Let’s look at two recent examples.
West Virginia Gov. Jim Justice says national security depends on his state’s coal
West Virginia Gov. Jim Justice recently made news by becoming a Republican at a Donald Trump rally. There are many reasons for the switch, but one of them was clearly to get in good with Trump, who has repeatedly expressed fealty to coal. (Coal miners were early supporters, and Trump loves those who love him.)
In subsequent meetings with Trump, Justice pushed a rather brazen proposal: a federal subsidy of $15 for every ton of Eastern coal burned in a US coal plant. (To his constituents, he called this request for $4.5 billion in taxpayer handouts a “new, bold idea to put coal miners back to work.”)
Sit with that for a minute. The power sector is abandoning Appalachian coal because Western coal (from the Powder River Basin in Montana and Wyoming) is cheap and natural gas and renewables are even cheaper. So Justice wants federal taxpayers to pay coal plants to keep burning it. He wants a negative carbon tax. A pollution subsidy.
It’s as though Nokia petitioned the government to pay people to keep buying its flip phones after the iPhone came out — you know, if Nokia phones were spewing millions of tons of pollutants into the air and water.
The mind, it boggles. What is the conceivable justification for such a policy? For a request this ridiculous, it could only be one thing: national security.
This bit from Tim Loh at Bloomberg is priceless:
Justice rejects the notion that his plan amounts to a “bailout” or “subsidy” for Appalachian coal. Rather, it’s a matter of national security, he said, because terrorists could easily blow up important gas pipelines or derail freight trains shipping coal to the east, leaving large swaths of the country lacking power-plant fuel.
“Can you imagine what would happen if we lost the power in the east for a month, or two months, or three months?” Justice said. “It would be like a nuclear blast went off. You would lose hundreds of thousands of people. It would be just absolute chaos beyond belief.”
Every day of the Trump era, reality and satire become more difficult to distinguish.
The best thing is that according to Justice, Trump was “really interested. He likes the idea.” Of course he does.
“Naturally,” Justice added, “he’s trying to vet the whole process. It’s a complicated idea.”
“Give my state’s industries a giant pile of money” is not really that complicated, at least on an intellectual level. But it is politically fraught. It’s not that there will be any pushback from a free market constituency. As the 2016 GOP primary showed, there isn’t much of one left. The Cato Institute guy and the Reason guy have expressed their requisite outrage, but by all accounts, what’s complicating the idea is opposition from Western coal states, which object to, ahem, “picking winners and losers.” And they’re Trump supporters too.
Whether to abandon conservative economic principles is an easy question for Trump. But how to settle a rent-seeking dispute between two supporters? That’s tough!
Coal magnate Bob Murray says the decline in his business is a national emergency
Justice’s request, ballsy as it was, pales next to Bob Murray’s.
The CEO of the coal mining company Murray Energy was an early and enthusiastic Trump supporter, donating hundreds of thousands of dollars to both the campaign and the inauguration. He is arguably responsible for Trump’s allegiance to the coal mining cause (and helped persuade him to withdraw the United States from the Paris climate agreement).
It seems that Murray had several meetings with Trump …read more