Republicans promote the free market rhetorically, but in crafting policy, all too often they jump ship and support corporate subsidies for favored industries. For example: coal subsidies.
President Donald Trump followed that well-worn path last month when he called for coal subsidies that would cost American taxpayers an estimated $10.6 billion per year, according to a joint analysis from Climate Policy Initiative and Energy Innovation.
Trump appears to be trying to live up to his promise to bring back coal jobs, but he shouldn’t ignore free market principles or force the energy market at the expense of the economy as a whole. Coal has been declining in its percentage of the energy market for several decades. Although anti-coal regulations put in place by previous administrations have played a role, the increased efficiencies in the production and use of natural gas have been the primary driver of coal’s loss of market share.
Coal production started declining in the ‘80s when low-sulfur coal become harder to find. It dipped again in the late 2000s as hydraulic fracturing made natural gas cheaper to produce. Once natural gas became competitive with coal, power companies started building cheaper and more efficient gas-run generation plants.
In addition, power generation from renewable energy is estimated to increase by 169% by 2040, while coal, as a percentage of our energy mix, could decrease by 51%, Bloomberg New Energy Finance predicts. For a number of reasons, solar has even become cheaper than coal in many countries, and as the Guardian reported, even with Trump’s laudatory hands-off approach on green energy, companies are still investing heavily in alternative fuel sources.
As with all state-controlled markets, government policies that favor one sector over another end up helping certain companies and individuals at the expense of others, and ultimately, it injures consumers and the economy, generally. President Trump’s plan would subsidize only a handful of companies that operate about 90 plants in the East Coast and Midwest. Meanwhile, the specter of cronyism has emerged. As E&E News reported, the official leading the charge on this initiative previously lobbied for FirstEnergy Corp., a company that stands to benefit directly from the coal subsidies.
Trump’s plan to help the coal industry is similar to former President Obama’s initiatives to prop up green energy, which conservatives properly lambasted as inappropriately “picking winners and losers.” Indeed, President Obama funded select green energy groups that played politics well, even if they didn’t use the money as efficiently as they could. For example, Solyndra received guaranteed loans, but an investigative report showed it never got close to yielding its expected results. Its principals played politics, wasted and misused taxpayer money, and kicked the can down the road until everything collapsed. Companies like Solyndra were able to ignore the signals of the market, cash in on government largesse, funnel massive bonuses to high-salary CEOs even as their business crumbled beneath them, and were never held accountable.
If Trump uses federal coal subsidies, one should expect similar results. Coal companies will be encouraged to play politics to stay afloat instead of being encouraged to provide more efficient products and services. And this means Americans may be forced to prop up companies that aren’t able to compete in the market. It is a waste of taxpayer money.
Trump and other Republicans should embrace free market principles that incentivize competition rather than embracing a top-down approach that will help a few businesses at the expense of everyone else. By all means, eliminate the regulations that unfairly target coal at the expense of other energy sources, but don’t transfer taxpayer money in the form of subsidies, another failing business model. The government should not be in the business of picking who wins and who loses.
Tyler Arnold is a communications associate at Cause of Action Institute.
