Economics 101: Trump’s Futile Fight to Save Coal

David Fessler By David Fessler
Energy and Infrastructure Strategist, The Oxford Club

Market Trends

On October 13, President Trump saluted a coal barge entering a port on the Ohio River.

Just days after a proposal to eliminate the Clean Power Plan showed up on the Federal Register, it was a powerful symbol of where the Trump administration stood on energy.

The plan had been put in place by the Obama administration as part of an effort to reduce greenhouse gas emissions and usher in the “Age of Renewables” and clean energy.

But Scott Pruitt, the climate change denier whom Trump chose to head the Environmental Protection Agency, sees things differently. Pruitt has declared the plan a “war on coal.”

Meanwhile, several coal plants around the country announced within the past few weeks that they were closing…

A single electric utility company – Luminant – owns three of the coal plants scheduled to close sometime next year, all of them in Texas.

Here’s what the Trump administration doesn’t understand: The fundamentals of economics cannot be rewritten. The president might as well wave goodbye to coal.

Trump should stop trying to fend off the Age of Renewables. It’s here. It’s especially evident in Texas, where wind power capacity has surpassed coal power capacity… and not by a little…

The three Luminant coal plants awaiting closure were responsible for 11% of carbon dioxide emissions from Texas plants in 2016.

Sandow Unit 5 is one of those plants. Construction ended in 2009, not even 10 years ago. So it’s not a question of age…

The reason it will close is much more fundamental: economics.

Coal simply can’t compete with renewables or natural gas. And market forces will continue to push dinosaurs like coal off the grid. Beyond empty gestures, there’s little to nothing the feds can do to forestall coal’s demise.

But that hasn’t stopped them from trying. Secretary of Energy Rick Perry recently proposed subsidizing both nuclear and coal in an effort to keep them powering the energy grid.

Killing the Power Plan: The Power Trump Lacks

If the EPA is ever able to replace the Clean Power Plan with something that allows greater emissions, lawsuits will be sure to follow. That’s because many states support lower carbon dioxide emission standards.

Let’s also not forget that Pruitt’s proposal belittles well-established facts regarding climate change.

In other words, his position won’t stand up to legal or scientific scrutiny.

Pruitt and the EPA are completely disregarding their obligation to protect the American public from harmful pollutants.

The good news is that 18 states, 16 cities and companies comprising 10% of America’s power generation all support the Clean Power Plan.

The EPA’s abdication of its responsibilities will likely unleash litigation that could keep its lawyers busy for years to come.

In this case, that’s a good thing.

Good investing,

Dave