Trump wants consumers to pay for keeping coal alive

In June, I wrote that by trying to prop up the dying coal industry, President Donald Trump risks creating a U.S. power industry that's "shackled to a corpse." Well, it looks as if Trump is figuring out just how to fit that shackle on.

First, Environmental Protection Agency chief Scott Pruitt wants to end federal tax credits for wind and solar power. He doesn't have the ability to do that — it's up to Congress — but since the tax credits are set to expire at the end of 2019, administration pressure could be enough to get the legislature to quietly fail to renew them. Since coal also receives government tax credits, selectively eliminating the credit for renewables would put the government's thumb on the scale in favor of coal.

This policy would be a bad idea — essentially, it would subsidize the production of greenhouse gases. But it also probably wouldn't have much of an effect on the outcome of the energy race. Natural gas and renewables have made enormous gains against coal power in recent years.

This is happening not because of federal tax credits, or even because of environmental concerns, but because of simple technological progress. Advances in hydraulic fracturing and solar panel manufacturing have driven down costs for gas and solar. The second, especially, probably will continue falling. Even with a handicap, coal is destined to lose the race, and in fact has probably already lost.

But another Trump initiative is potentially much more dangerous to the country's energy future — both because it would have significant effects, and because it's something the executive branch can implement unilaterally. The administration has proposed a rule that would force utilities to buy electricity from coal and nuclear plants that guarantee these plants a "fair" rate of return. Technically, the rule applies to any power plant that can keep a large stock of extra fuel on hand, but since this can only be done for coal and nuclear — since these are the only types of fuel that can be cheaply stored in large quantities — it will have the effect of forcing many utilities across the country to buy one or the other of these types of power.

Encouraging nuclear will help fight climate change. But coal is more prevalent than nuclear power in the U.S. And since many existing nuclear power plants are already cost-effective without this rule — the big cost of nuclear is up front — the main effect of the rule would be to preserve coal plants that are no longer competitive relative to gas, wind or solar.

Because this rule would mandate which type of electricity power companies are allowed to buy, it can't be negated by falling gas and solar costs. If gas or solar gets cheaper, Trump's rule would simply increase the amount that utilities are forced to overpay. In other words, as technology progresses, Trump's rule would make the economy more and more inefficient just to keep the coal industry alive.

As Slate's Jordan Weissmann reports, the new proposal may never become law. It goes against lots of people's interests -- gas producers in particular are politically very powerful. But even if the rule dies the death it so richly deserves, the administration's determination to preserve the coal industry at any cost to the American people is a very bad sign.

The reason it's a bad sign is only partly because of the environmental harm. The U.S. is a big carbon emitter, but ultimately the world as a whole matters more. And even if Trump ensures the U.S. remains dependent on an ancient, outmoded energy source, the rest of the world will continue its rapid shift toward cleaner technologies:

An even bigger worry is the economic harm that this rule would do, and the cavalier disregard with which the Trump administration is willing to inflict pain on millions of citizens in order to protect a tiny, favored constituency.

Every part of this proposal reeks of crony capitalism. Compare the tiny size of the coal industry — the entire sector employs fewer people than the sandwich chain Arby's — to the large number of consumers who would be forced to pay higher prices under the rule. Or consider the disregard for technological progress and real economic costs. This rule is the kind of inefficient giveaway that typically characterizes poor, developing countries.

And that could be a signal of more to come. Trump may be a tax-cutter, but when it comes to specific industries that support him politically, he's no free-marketer. If executive actions like this aren't vigorously opposed, coal may not be the only dying industry that Trump ends up chaining the U.S. economy to before he's through.

 

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