A federal subsidy of $15 per ton of Appalachian coal is West Virginia Gov. Jim Justice's bright idea for bringing back his state's hard hit coal mining industry.
Justice, a Republican, proposes using taxpayer funds to bribe electric power generation companies to burn coal instead of cheap and abundant natural gas. As a result of the fracking boom, the supply of natural gas has soared and its price fallen. Consequently, the price of gas used in utility plants fell last year as low as $16 per megawatt hour (a million watts generated continuously over an hour) compared to around $22 for coal.
In 2008, almost 50 percent of electricity in the United States was generated by burning coal and just over 20 percent was generated using natural gas. In 2016, coal was the fuel for just over 30 percent of generation, compared to nearly 34 percent from natural gas.
Although clean air regulations played a role, the switch by utilities from coal to natural gas was largely the result of market forces. So what do politicians do when they don't like what markets are telling them? Fix them so that they come out "right."
Apparently, Justice proposed his coal subsidy plan when he appeared with President Donald Trump at the Boy Scout Jamboree. The governor told Bloomberg News the president is "really interested. He likes the idea." In addition, he justified the subsidy proposal as a matter of national security. As Bloomberg reports:
Justice rejects the notion that his plan amounts to a "bailout" or "subsidy" for Appalachian coal. Rather, it's a matter of national security, he said, because terrorists could easily blow up important gas pipelines or derail freight trains shipping coal to the east, leaving large swaths of the country lacking power-plant fuel.
Of course, national security is the last refuge of a scoundrel, to paraphrase Samuel Johnson, and proposing fossil fuel subsidies is a particularly scoundrelly idea. But Justice might ask, why shouldn't coal get a subsidy? After all solar, wind, biofuels and now even nuclear power get subsidies.
How about this idea: Let's get rid of all energy subsidies.* As I explained in my book, The End of Doom:
Those of us who appreciate the power of competition and market incentives to call forth new technologies and drive down prices must recognize that governments have been massively meddling in energy markets for more than a century. Consequently, it's really impossible to know what the actual price of energy supplies would be in a free market. … [Another] result is retarded innovation in the technologies of energy generation. A big first step toward renovating our energy supply systems would be to eliminate those impediments to understanding the real comparative benefits and costs of the production and use of energy.
Justice's proposal to subsidize coal mining in his state is just another such impediment. Surely President Trump is not crazy enough to propose a federal coal subsidy, right?
*Actually, just eliminate all subsidies.