Coal-related jobs are going up in flames, but new ones will emerge from the ashes. That’s the conclusion of a new economic study that examines the Obama administration’s energy policy and its potential impact on the broader economy.
Appalachia’s coal counties are smoldering for a multitude of reasons, namely the decline in coal production as a result of thinning seams that are hard to mine, inexpensive natural gas that is more of a national favorite and, tougher environmental regulations that are clamping down on power plant emissions.
Just how, though, does the Environmental Protection Agency’s Clean Power Plan factor into this? Expected to be finalized this summer, it would require a 30 % cut in carbon dioxide releases from existing electric plants that are powered by fossil fuels. While certain sections of the country will feel an unenviable social and financial pain, other regions will prosper, discovering newfound opportunities and realizing an economic expansion.
“At a higher level, when you see a big shock, things will eventually get better,” says Doug Meade, an economist at the University of Maryland, and co-author of the just-released economic study, in an interview. “Yes, the economy does heal: for industries that lose jobs there will, eventually, be demand in other places.
“For coal, it is very localized,” he adds. “People may have to move to other places. Look at shale gas and oil: there is lots of migration to these areas” that include such places as Texas, North Dakota, and even West Virginia.
The study, which was funded by the Energy Foundation, concludes that job creation would start out modestly but pick up over time. Along with Jason Price of Industrial Economics, the two found that beginning in 2020, job growth would equal 74,000. That number expands to 273,000 in 2040. Why? new energy efficiencies would lead to greater savings that are reallocated in everything from natural gas to renewable energy.
No doubt, coal country is feeling squeezed. An editorial appearing in the Charleston (WV) Gazette says that the state’s coal severance tax totaled US$531 million in 2012 before dropping to US$407 million in 2014. However, the oil and gas severance tax jumped from US$79 million to US$188 million during the same time period, it adds.
Energy transitions do not come without economic hardship, which in this case applies to coal communities. “However, we can’t say we won’t do it because a small number of jobs would be lost,” says Mindy Lubber, president of Ceres CERE -2.13%. “We need to make it an imperative to retrain workers who are in the coal industry and to develop them so that they can take part in a more ambitious economy.”
Lubber adds that she recognizes that major business groups, such as the U.S. Chamber of Commerce and the National Association of Manufacturers, remain highly skeptical of the Clean Power Plan. But she says their opposition appears far less intense now than a few years ago, as a greater number of businesses are getting on board. Green initiatives, she adds, are creating tax revenues and good jobs — all on top of the fact that younger Americans are entering the economic ranks and demanding that companies use more sustainable energy.
In the language of the Clean Power Plan, the EPA proposes a collection of “building blocks” — an array of different categories of resource options that gives flexibility to states to decide how they want to comply. States pick and choose among strategies: improving plant heat rates, promoting efficiency, fostering renewables, favoring gas over coal, or deploying demand response to reduce the quantity of energy generated.
The reallocation of investment to modern technologies, say economists Meade and Price, will produce new wealth elsewhere around the country. Not surprisingly, the EPA agrees, estimating the cost of compliance to be between US$7 billion and US$8 billion by 2030, producing US$31 billion in benefits. After that time, EPA Administrator Gina McCarthy says that for every dollar invested in the plan, US$7 will be returned.
Heavy industry, conversely, says that the compliance cost would supersede any advantages. Those costs, in turn, would be passed through to business and residential customers in the form of greater electricity rates — a dynamic that will hit the country’s manufacturing sectoring, making it less competitive and affecting job creation. TheCompetitive Enterprise Institute contends that the real costs would run from US$41 billion to US$336 billion over 15 years.
For sure, coal still provides nearly 40 % of the nation’s electricity. But many of those plants are older and most utilities have finally acquiesced to the fact that it is cheaper to retire those units than to retrofit them with pollution controls. American Electric AEP -0.29% Power Co. and Duke Energy DUK -1.31% Corp., two of the biggest coal guzzlers, are closing about 6,000 megawatts each in the near term. Southern Co., meantime, is shutting down 4,000 megawatts.
“The utilities sector, overall, is often seen as a blocker and stuck in the past,” says Tom King, U.S. president of the U.K.-based National Grid. “But it is just the opposite: We are seeing the industry committed to affordable, reliable and clean energy. There’s a lot of innovation taking place. Utilities can enable this transition.”
NRG Energy is also at the forefront of the challenge: While it has long provided electricity from coal, it now says that it is well on its way to reducing its carbon footprint and that it has already cut heat-trapping emissions by 40 % from 2005 levels. It’s not finished and aims to reduce its carbon releases 50 % by 2030, and 90 % by 2050.
“Those improvements are not costless,” notes economist Price. “But the shift to less carbon-intensive fuels and energy efficiency will have positive implications on employment and the broader economy.”
That’s a tough sell deep in Appalachia’s coal country, but it’s a job that leaders there can’t avoid any longer.