Noah Kaufman: Help for coal country from a carbon fee?

By By Noah Kaufman

Here’s a newsflash that’s no news to West Virginia: Coal miners were the backbone of our economy for decades, but with the coal industry now in decline, the Mountain State needs to chart a future very different from its past.

That changing future is the centerpiece at a public conference at West Virginia University today. I am in Morgantown to learn from the distinguished speakers, led by Senator Rockefeller, and to join them in calling for desperately needed support and investment in Central Appalachia. I’m also presenting new research from the World Resources Institute showing coal country can reap benefits from an unlikely source: a policy to put a price on carbon emissions.

If designed well, a carbon price could provide billions of dollars each year for these communities while curbing air pollution and the risks of a changing global climate.

Across the country, coal mines are closing or scaling back operations. Recent estimates suggest the U.S. coal industry is losing roughly 10,000 jobs a year, with West Virginia and Kentucky the hardest-hit states.

In 2015 alone, nearly 5 percent of the nation’s coal electricity generation shut down, and more will follow. They will not be replaced with new coal plants, because we can now produce cheaper electricity using other sources, and recent federal regulations would require new coal plants to include expensive technologies that capture and store carbon dioxide emissions. Don’t take my word for it: stock prices reflect market expectations about companies’ future earnings, and the recent stock prices of the three largest coal companies — Arch Coal, Alpha Natural Resources and Peabody — have all declined to near zero.

Hard-working coal communities in Central Appalachia drove innovation and progress for decades but now lack the resources to build a new and prosperous economy for the region. Coal company bankruptcies have jeopardized the pensions and health benefits of coal miners and their families, and the unemployment rate in West Virginia is the second highest in the country.

Declining state and local tax revenue from coal companies and their employees means there’s less money for necessary investments in infrastructure, economic development and assistance to former coal miners looking for new opportunities. Local, state and federal policies offer band-aid solutions to treat the region’s increasingly nasty wounds. Smart use of the revenue from a carbon price could provide the resources Central Appalachia needs and deserves.

To understand why a carbon price could lift up West Virginia’s coal communities, it is important to recognize that the policies to combat the effects of climate change are here to stay. In November 2014, the world’s best scientists outlined the grave risks of continuing to rely on heat-trapping fossil fuels (like coal) that exacerbate changes in the climate. Along with all other major countries, the United States has heeded that warning and committed to significant policy actions to address the problem.

But climate change policies come in many forms. Putting a price on carbon offers a free-market approach that means companies pay for every ton of carbon dioxide they emit, producing a large revenue stream.

Nearly all economists prefer a carbon price because it makes cutting emissions less costly than using regulations, and because the revenue can be put to productive use. Our new publication shows how this revenue can ensure that poor households are protected from increases in energy prices and that coal communities receive fair compensation for the struggles associated with the transition to a lower-carbon economy.

Depending on the policy details, a carbon price could generate revenue of $100 billion to $200 billion per year. Just a small percentage of that revenue would imply billions of dollars in resources for coal communities, and that could be a game-changer.

It could be used to ensure lifetime guarantees for coal miners’ pensions and health benefits, which West Virginia’s senators have proposed to Congress in the Miners Protection Act.

It could be used to develop land from abandoned coal mines for economic development projects, as proposed by Rep. Evan Jenkins, R-W.Va., (among others) in the RECLAIM Act.

It could pay for technological innovation, such as carbon capture and storage, that could make West Virginia a leader in a low-carbon energy future.

Or, carbon pricing revenue could simply be allocated to states, which might be best positioned to determine the programs best suited to grow jobs and incomes close to home.

Today at WVU, I’m looking forward to learning about local organizations doing just that, such as Refresh Appalachia, the West Virginia Community Development Hub and the Eastern Kentucky Concentrated Employment Programs.

The status quo is failing Central Appalachia’s coal communities, and there is an urgent need for cost-effective and equitable climate change policy. Coal communities and climate activities are not natural allies, but a pair of crises can bring improbable allies together. With a carbon price, the transition to a low-carbon energy system can be an opportunity to take Central Appalachian communities beyond coal.

Noah Kaufman is an economist for the World Resources Institute and a speaker at the WVU College of Law’s 2016 National Energy Conference in Morgantown today.

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