More on Coal

In my last post on the topic of coal and Mountain Top Removal mining, I proposed that one of the primary steps that must be taken to remedy the situation is to make the price of coal account for the true costs associated with its production. Doing so (through, for instance, the implementation of a carbon tax) would incentivize a shift toward more renewable energy sources. The process of researching and writing for that post got me interested in the topic, so I decided to dig into what it might actually look like to bring the hidden costs of coal to light.

No major power source pollutes like coal does. It emits more sulfur dioxide, nitrogen oxide, and carbon dioxide than any other power source. At the root of the problem is, in a sad twist of irony, the Clean Air Act. When it was passed, the CAA set strict limits on pollution from new power plants but exempted existing power plants. Notre Dame Law School Professor Bruce Huber talks about this in his article Transition Policy on grandfathering and environmental policy. He notes that pollution levels remained nearly the same after the passage of the CAA because the existing plants were still emitting just as much and potential new plants had understandably been discouraged from entering the industry. This has become a significant air pollution issue, especially given that coal-powered plants are meant to run for about 30 years but many of the grandfathered plants are now well over 50 years of operational activity ( Even those few new coal-powered plants that managed to break into the industry easily figured out ways around the CAA. For instance, when told that they couldn’t have any pollutants near the ground, they raised their smokestack height to over 500 feet. This higher release point helped them escape the regulation but also made it easier for pollutants to drift other areas, creating a surge in acid rain. Another CAA rule said that any old coal plant that was modified automatically became subject to the new requirements – unless the modifications were a part of “routine maintenance” procedures. Old power plants, therefore, simply started classifying every single modification as “routine maintenance” so that they didn’t have to worry about the CAA.

In their papers The Hidden Costs of Coal and Reconsidering Coal’s Fair Market Value, NYU Law School professors Jayni Hein and Peter Howard point to the federal coal industry as the best place to start addressing the issues with coal production. After all, coal mining on federal land accounts for at least half of the country’s coal. Coal companies have, in particular, abused the coal leasing strategy developed by the government in 1982 to lease federal mining land to coal companies. As usual, the industry found a loophole in the rules and utilized it to save money and avoid compliance. They found that if they could convince state and federal agencies that the federal mining lands in question were not located in “standard coal production regions,” then they could use that determination as a way to escape compliance. In the end, the coal companies were able to lease whatever mining land they wanted for whatever price they determined, meaning that massive amounts of coal were sold at high prices to the consumer while the coal company only paid a few cents per ton. They also managed to find a way to avoid paying most of their royalty rates, costing taxpayers over $1 billion on the other end. Hein and Howard therefore recommend the following course of action:

1)      Raise Royalty Rates to account for the environmental and social costs of coal production and to ensure that the coal companies pay for the damage they have done

2)      Revise the subsidy scheme for coal to incentive less pollution. (Sound familiar? This is my #1 recommendation for the agriculture industry).

3)      Increase minimum bids for coal leases to account for external costs

To this list of recommendations, I would add that the carbon cost of the production, transportation, and utilization of the coal also be taken into account via a carbon tax. To read my full blog post in support of a carbon tax (as opposed to a cap-and-trade approach), go to







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