Editorial: Coal subsidies don't make sense

Published on Friday, 11 August 2017 12:39 - Written by

Conservatives who objected to subsidies for green energy - such as the Solyndra money-pit - should object just as strenuously to subsidies for the coal industry, now that President Trump is in office. The principle is the same - let the markets decide. No energy industry should be subsidized by taxpayers - not solar, not oil and gas, and not coal.

Someone should remind the Trump administration about this simple economic principle.

“West Virginia Governor Jim Justice said Donald Trump is ‘really interested’ in his plan to prop up Appalachian mining by giving federal money to power plants that burn the region’s coal,” the Bloomberg news service reports. “Justice, a coal and real estate mogul elected governor last year as a Democrat, announced at a West Virginia rally alongside President Trump last week that he’s becoming a Republican. Justice has recently spent a ‘goodly amount of time’ meeting one-on-one with Trump and has liked the feedback to his pro-coal proposal. The plan calls for the Department of Homeland Security to send $15 to eastern U.S. utilities for every ton of Appalachia coal they burn.”

According to the governor, “He’s really interested. He likes the idea.”

The plan would be expensive.

“U.S. power plants burned at least 110 million short tons of Appalachian coal in 2016, according to Andrew Cosgrove, an analyst at Bloomberg Intelligence,” the news agency reports. “A payment of $15 for each of those tons would cost at least $1.65 billion.”

But it’s not just the expense. It’s simply a bad idea.

If coal is a viable business, it can save itself. Trump can lift some of the burdensome regulations imposed by previous administrations. But even then, coal’s biggest threat won’t be government. It’s natural gas, a more efficient and less expensive fuel source.

That’s what George Mason University economist Adam Millsap explained recently.

“Government regulation has certainly hurt the coal industry, but regulation is not the only thing that damages an industry,” he wrote. “Competition from other firms, creative destruction, can also reduce profits, production and employment. In coal’s case, the rise of fracking and natural gas has also played a significant role.”

Interventionism isn’t going to change that - unless Trump plans to punish natural gas production as Obama punished coal production. And that’s exactly the wrong approach.

“Many people in West Virginia, Kentucky, Pennsylvania and other areas have been hit hard by coal’s decline, so it’s understandable that Trump and other politicians want to do something to help,” Millsap points out. “But in a market economy some industries are always going to be shrinking while others are expanding: In this case it’s coal and natural gas. This creative destruction is essential for economic growth, so it’s important for us to accept and adjust to changes in the economy, even when they are painful in the short run.”

It’s not up to government to decide which industries succeed and which industries fail. That’s the mistake the Obama administration made with massive green energy subsidies.

Let’s not repeat that mistake with subsidies for coal.