Obama's War On Coal Is a Good Idea

Moneybox
A blog about business and economics.
Sept. 20 2013 8:49 AM

Obama's War On Coal Is a Good Idea

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No war on coal in Bitola, Macedonia and look how nice it is!

Photo by ROBERT ATANASOVSKI/AFP/Getty Images

Today the Environmental Protection Agency is going to roll out new regulations on new coal- and gas-fired power plants. Specifically, new gas-fired plants will be limited to 1,000 pounds of carbon dioxide emissions per megawatt hour while new coal plants will be given the more generous limitation of 1,100 pounds of carbon dioxide per megawatt hour. The difference, however, is that existing technology makes it reasonably easy for gas-fired plants to comply with that rule while it's extremely doubtful that any new coal-fired power plants will be built under this regulation.

Since these rules are bad for the coal-extraction industry, there's going to be a revival of talk around the idea of a "war on coal" and the Obama administration will naturally deny that it's waging one.

The truth, however, is that a war on coal is a good idea.

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Here's an analogy. I live down the block from Le Diplomate, a popular newish restaurant in D.C. This restaurant, in the course of doing its business, generates a lot of trash. And by district law, like other commercial establishments it needs to pay a garbage company to haul that trash away. It would, of course, be cheaper for them to just leave the trash in the alley rather than paying for cleanup. But this wouldn't be a real efficiency gain of any kind. It's just that the cost of trash disposal would be shifted off the shoulders of Le Diplomate's owner (who conveniently lives in Philadelphia) and onto the shoulders of those of us who live on the block. 

That's the basic business model of coal-fired power plants—huge costs are borne by people who use the air rather than by the people who burn the coal.

The "war on coal" consists of beginning to ask coal-burners to actually bear the costs of burning coal. A restaurant that's only going to be profitable if it's allowed to dump garbage in the alley rather than haul it away ought to be shut down. Obama is in fact taking a much more timid step of saying that existing restaurants can keep dumping trash in the alley, but new ones won't be able to open unless they agree to pay to have the trash hauled. The coal industry believes that it won't be economically viable if it has to comply with those rules. If true, that's a damning indictment of their underlying business model, not of the Obama administration.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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