Cut out the coal
Barack Obama offered us change we can believe in. But, in our summer of discontent, Congress flees Washington with the cap and trade bill substantially gutted and health care reform left swinging in the wind.
Mr. President, now’s not the time for more compromises, but for leadership to save our common futures.
Cap and trade, the Washington way, is very expensive and ineffective. Paying the coal companies, the miners and the utilities to leave the coal in the ground is emerging as a real, affordable, and politically possible climate solution.
Buying off the coal companies at market is not only affordable, but can eliminate in 10 to 20 years the leading greenhouse baddie, the source of 36 percent of our greenhouse gases.
For less than the estimated $8 billion a year we already shovel out in existing coal subsidies, we can finance a 20-year buyout of the right to mine coal. That’s a zero net cost for taking a giant step for a sustainable future. And since the coal companies will still be able to sell coal, albeit in amounts that diminish yearly, they should be happy.
We can make economic growth mean ecological or improvement or continue to follow the path of pollution and self-destruction. We can cost-effectively phase out coal, invest in renewables and efficiency, use natural gas for the transition fuel and get to an 80 percent cut in emissions.
The United States can go from climate laggard to climate leader, put irresistible pressure on the rest of the OECD, and on China and India to follow suit. Cutting coal, by necessity, will make us exercise global leadership in building our renewable economy.
We cap coal production. Each year reduce it 5 or 10 percent. Make payments to the coal companies for mineral rights, to our 40,000 coal miners for buyouts and retraining, and to the coal states for setting up efficiency utilities, like Efficiency Vermont, to aggressively reduce consumption and offset rate increases.
How much would it cost? Certainly a small fraction of carbon capture and sequestration (CCS) estimated by the Department of Energy at $100 to $300 per ton. That’s hundreds of billions a year to keep burning coal. A new Harvard study calls dreams of $10 per ton CCS as without a realistic basis.
In the United States, we burn about a billion tons of coal a year for electricity. Coal costs about $25 a ton at the mine. We could pay the coal guys $25 billion a year not to mine it, and it would be worth it. But we don’t have to. Instead we can just buy out mineral rights using existing coal subsidy money of about $8 billion a year.
The Energy Information Administration’s Annual Coal Report estimates total recoverable coal reserves from existing mines at 18.5 billion tons of coal, less than a 20-year supply. That’s why they keep blasting the tops off mountains.
Peabody Energy, the largest coal company with about 17 percent of the market, estimates land and coal assets on its 2008 balance sheet at $7.4 billion. Scaling up, that gives up a rough estimate of $40 billion to $50 billion for a coal buyout. Amortizing that over 20 years at 6 percent interest for the coal boys gives us a cost for the mineral rights of about $3.5 billion to $4.3 billion a year for a total of $69 billion to $86 billion for 20 years. Not bad.
This figure can be compared with the market capitalization of the coal companies, how much Wall Street says the whole shebang is really worth.
We need to add the cost for buying out older miners and retraining younger miners for jobs in renewables and funding coal states’ efficiency utilities the most cost-effective and pollution-cutting means of offsetting increased power costs. Add $3 billion or $4 billion a year and we have it.
Mr. President, it can be done, it’s the cheapest solution, and we need to do it.
Roy Morrison is director of the Office for Sustainability, at Southern New Hampshire University. With Dr. Gregor Czisch, he is working on plans for continental renewable grids.