Brattle Economist: Trump Administration's Energy And Environmental Policy Likely To Reduce Coal Production And Mining Employment

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Oct 17, 2017, 11:05 ET

WASHINGTON, Oct. 17, 2017 /PRNewswire/ -- An analysis of the electricity generation sector and coal market by an economist at global economic consulting firm The Brattle Group finds that the Trump Administration's energy and environmental policy initiatives tend to favor natural gas as a generation fuel, likely reducing coal production and mining employment. The results of the analysis were presented today by Brattle Principal Marc Chupka at the Energy Bar Association's (EBA) Mid-Year Energy Forum in Washington, DC.

The presentation, "When Coal is the Goal: Environmental Policy and Energy Markets," showed that selected elements of the Administration's policy, such as the repeal of the Clean Power Plan (CPP) and the rollback of proposed environmental rules on coal mining operations, could boost U.S. coal production by about 50 million tons per year in 2020 and by 150 million tons in 2030, compared to the baseline coal use projections under the Obama Administration's policy.

Importantly, these changes to CPP and environmental rules do not take place in isolation. When combined with the pro-natural gas elements of the Trump Administration's policy, the "all of the above" pro-fossil fuel policy of simultaneously expanding coal and natural gas supply would also reduce the price of natural gas and continue to favor natural gas as a generation fuel. This would likely reduce coal production by about 220 million tons in 2020 and by 210 million tons in 2030 compared to the previous administration's policy. This net reduction in coal production would reduce mining employment by between 13,000 and 16,000 jobs.

"Policies that reduce production costs for all fossil fuels will not necessarily increase the consumption of all fuels," noted Mr. Chupka. "The competition between natural gas and coal for generation fuel continues to favor natural gas."

The presentation also discussed the recent baseload plant support policy initiative by U.S. Secretary of Energy Rick Perry, which would require the U.S. Federal Energy Regulatory Commission (FERC) to administer financial support through tariffs that cover the costs of baseload coal and nuclear plants in restructured wholesale power markets in order to discourage retirements and purportedly maintain grid resilience. Mr. Chupka observed that less than 20% of the nation's coal fleet and only 5% of the nuclear fleet have retired in the past 15 years, and that while these retirements have been concentrated in some areas, such as the PJM market, the very same markets that have experienced the most retirements continue to have the highest proportion of coal and nuclear capacity. Depending on how the financial support is structured, the coal plants in these regions could receive billions of dollars annually without increasing the plants' overall output. The main reason for this disconnect is that financial assurances for fixed cost recovery will not make these plants more economical in the dispatch competition for a share of power production. Thus, while the proposal may help owners of coal and nuclear plants, it might not affect coal production and mining employment.

Mr. Chupka's presentation is available to download at brattle.com.

The Brattle Group analyzes complex economic, finance, and regulatory questions for corporations, law firms, and governments around the world. We are distinguished by the clarity of our insights and the credibility of our experts, which include leading international academics and industry specialists. For more information, please visit www.brattle.com.

SOURCE The Brattle Group