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A not-so-modest climate proposal: why not just buy out the US coal industry?

Dwindling, but not forgotten.

Consider two key facts about coal in the United States:

  • First, coal mining and burning is still a major contributor to global warming, responsible for about 25 percent of America's overall greenhouse gas emissions.
  • Second, the coal industry is shrinking rapidly, getting crushed by both new air pollution regulations and competition from cheap natural gas and renewables. Back in 2008, coal provided fully half the country's electricity. Today it provides just one-third. And that's expected to keep shrinking as we tackle climate change. Bad news for coal miners.

Now let's consider a recent and rather radical proposal for addressing both of those issues simultaneously.

The case for simply buying out the US coal industry

In a recent Washington Post op-ed, Stephen Kass, a lawyer in New York, floated this bold idea: "The federal government should buy coal plants, shut them down and pay to retrain their employees." Here's the longer version:

Under Plan A, the federal government would buy or, if necessary, seize under eminent domain all existing U.S. coal plants and close them over 10 years. Such a use of federal authority is well-established and would not be subject to serious legal challenge. (Plant owners could dispute the amount of compensation offered but not the public purpose of federal action intended to protect the environment.)

Plan A would include fair, market-based compensation for coal-plant shareholders and generous severance, relocation and job-training programs for employees, who should not be asked to bear the burdens of emissions reductions. Once authorized by Congress, Plan A could be carried out before the legality of the Clean Power Plan was finally adjudicated and long before it could be implemented.

The basic rationale is that this would reduce US power plant emissions more quickly and more certainly than President Barack Obama's Clean Power Plan, which is currently on hold and bogged down in litigation and is dependent on state cooperation. What's more, a buyout would help the workers who'd be affected by the dislocation.

The pros and cons of a coal buyout

Kass's op-ed isn't a fully fleshed-out proposal — it's more of a conversation starter than anything else (especially since Congress isn't going to enact this anytime soon). But it's an intriguing idea, and one that's been circulating a few times over the years (see this piece by Robinson Meyer arguing that climate-concerned billionaires should buy up and retire US coal reserves). So a few broad thoughts on this:

1) In theory, yes, this would be a huge step for climate change. Even in its diminished state, coal remains a huge source of carbon dioxide — responsible for about 77 percent of emissions from America's electricity sector in 2014:

(EPA, US Greenhouse Gas Inventory 2016)

If we replaced all that coal with cleaner natural gas overnight, CO2 emissions from power plants would fall 40 percent. And America's overall CO2 emissions would fall 14 percent. (You'd almost certainly get some offsetting methane emissions from leaky gas wells and pipes, though.) If you subbed in renewables or nuclear or hydropower for natural gas, emissions would fall even more sharply. Enough to meet America's near-term climate goals.

2) Kass doesn't offer an estimate for how much it would cost to buy out the US coal industry, but it wouldn't be cheap. A few years ago, Felix Cramer and Gil Friend floated a similar proposal and estimated it would cost $50 billion to buy the nation's coal plants and mines. If anything, that seems low. The federal government would also have to take over the billions in (unfunded) obligations that mining companies have to reclaim damaged land, plus pensions for miners, and so on.

3) The biggest cost, meanwhile, would be in replacing all that coal-fired power with alternative energy sources. That would fall largely on utilities and consumers, particularly those in coal-heavy states like those in the Midwest. Think of that this way: The Environmental Protection Agency estimates that the Clean Power Plan will cost $8.4 billion a year in 2030 and cut coal generation by 20 percent. To reduce coal by 100 percent, presumably it'd cost at least five times that much — and probably much more, given that natural gas prices would rise more sharply with the increased demand and it would be even tougher to scale up renewables that far that fast.

4) On the flip side, any discussion of costs should acknowledge that coal burning itself imposes heavy costs on society that aren't typically accounted for: deadly particulate air pollution, water contamination, climate damages, and so on. Back in 2011, a study in the Annals of the New York Academy of Sciences pegged these externalities at $300 billion to $1 trillion per year. You can quibble with the numbers, but there are undoubtedly huge benefits — particularly health benefits — to ending our reliance on the dirtiest of all fossil fuels. (Again, assuming we can replace all that electricity.)

5) Another wrinkle here: Our options aren't just "coal buyout" or no "coal buyout." We should also consider other climate policies to reduce emissions. Many economists would prefer to rely on economy-wide carbon pricing that would give companies incentives to curtail CO2 wherever they find it most cost-effective. There's heaps of academic research to suggest this would be the cheapest path forward.

6) Then again, there's no real precedent for a major economy eliminating coal burning through a carbon tax. By contrast, we do have precedent for a government-mandated coal phaseout. Over the past 11 years, the Canadian province of Ontario has shuttered all 19 of its coal units — which once provided one-quarter of its electricity — and replaced the electricity using nuclear reactors, hydropower dams, and renewables. Oregon is also winding down its coal use by legislative mandate. That's the model here. Economists may not find regulations quite as elegant, but they're also much simpler and easy to understand.

7) Any coal buyout would almost certainly be a lot messier than Kass suggests in practice. First, it'd have to be approved by Congress — and, while he makes a case otherwise, it's highly doubtful that Republicans would go for this. Many environmentalists would also chafe at the idea of forking over money to coal utilities. It flies against the whole "polluter pays" principle. Plus, countless lawsuits would arise over who has responsibility for things like the mining messes that the coal industry has left behind.

8) Historical footnote: On Twitter, Kalee Kreider notes that a coal buyout was actually floated in the 1990s in discussions between then-West Virginia Sen. Robert Byrd and the Clinton administration — back when the government was running a budget surplus. But it never went anywhere and died when George W. Bush came to power.

9) As Kass points out, if the government is going to shut down the coal industry, it only seems fair that we take care of the 75,000 coal miners and 100,000 employees involved in coal plants and transportation that would be hurt by the switch. He suggests providing money for retraining and relocation. But that's easier said than done. As Dwyer Gunn reports in Pacific Standard, the federal government's track record on job training is pretty dismal. In the past, many programs simply haven't worked at all. (This is something to keep in mind with any climate policy: It's worth noting that Hillary Clinton has a $30 billion plan to revitalize coal communities.)

10) Putting all my quibbling aside, Kass is onto something. Right now, the Obama administration is yanking on various regulatory levers trying to nudge down US emissions bit by bit. Some power plant regulations here. Fuel economy standards there. A crackdown on methane leaks. Hillary Clinton is planning to extend this kludge-y approach. The aim is to push down US emissions modestly — 26 percent below 2005 levels by 2020 — as part of broader global climate efforts under the Paris deal.

Right now, given the gridlock in Congress, incrementalism is about the best anyone can hope for. But if we really want to make a dent in global warming, we'll eventually have to think about truly drastic cuts in emissions — think 80 percent by midcentury. And that means thinking much, much more creatively about how to get there.

Read more: 11 maps that explain energy in America