Market forces have been phasing out coal for the last decade in favor of cheaper electricity sources. Coal’s decline has been steady, regardless of which party sits in the Oval Office. When President Trump took office in 2016, coal represented 30 percent of total U.S. electricity generation. By his first term’s end, and despite efforts to prop up the industry, that share had plummeted to 20 percent.
A recent series of executive orders throw a federal kitchen sink at bolstering this energy resource, which markets deem uneconomic, while simultaneously declaring an energy emergency. But the White House cannot erase energy market realities by presidential fiat.
Executive orders cannot change the fundamental economics of coal-fired power plants, nor can they alter states’ authority over electric generation facilities, which Congress delineated in the Federal Power Act. The orders also will not bring new coal plants online within the next four years, because their time horizon from investment to build, interconnection, and operation is far longer.
What the orders (and related proclamation) will do is raise electricity prices, exacerbate investment uncertainty, increase pollution and reduce royalty revenue that benefits communities and taxpayers. They will also fundamentally undermine energy markets. Unfortunately, these harms will likely outlive the administration’s lifespan.
These measures include three actions that are especially problematic from an economic perspective.
The “Beautiful Clean Coal” order directs the Department of Interior to reduce the “royalty rate” that coal mining companies pay to the federal government when extracting coal from public lands. Cutting royalties provides a windfall to mining companies at the expense of American taxpayers.
Mining companies currently pay the U.S. government royalty rates ranging between 8 percent and 12.5 percent for coal extraction. The federal government then funnels about half of this revenue to local mining communities, funding essential services such as schools and infrastructure. By comparison, oil and gas drillers pay significantly higher royalties, ranging between 12.5 percent and 18.75 percent. Land leasing for offshore wind projects has been halted altogether.
This executive order seeks to slash coal royalty rates further, under the guise of promoting “America’s economic prosperity and national security.” It is doubtful that transferring revenue from taxpayers to coal companies can help America prosper. Moreover, favoring coal over natural gas or renewables undermines energy independence and economic growth, picking winners that couldn’t succeed in a fair market.
Second, the “Regulatory relief” proclamation exempts some (currently unidentified) coal plants from complying with pollutant emission standards, using presidential exemption authority under Section 112(i)(4) of the Clean Air Act. Relaxing mercury and air toxics emission limits for coal-generating units will have several problematic effects.
These exemptions, granted solely at the president’s discretion, will prevent pollution reduction and endanger Americans’ health and well-being. Exposure to mercury can lead to brain damage in fetuses and newborns. Particulate matter pollution from these plants causes a wide range of health problems, such as cardiovascular issues and respiratory diseases like asthma. This move will also undermine fairness within the energy industry for the operators who have already invested billions to meet these emission standards.
Third, an order on Strengthening Reliability would command uneconomic coal plants to keep operating when markets are pushing them out, all while passing the costs onto Americans’ electric bills.
This proposed misuse of the Federal Power Act to bail out coal plants uses an obscure provision (Section 202(c)) that allows the secretary of Energy to temporarily order power plant operation and compensation if an “emergency exists by reason of a sudden increase in the demand for electric energy.” The Department of Energy’s own regulations and prior statements describe an “emergency” as “unexpected” and explicitly exclude shortages caused by “economic factors,” unless blackouts are “imminent.”
But the Trump administration is aiming to mischaracterize the AI-driven increase in electricity demand as a “sudden” emergency that requires subverting grid operators and quashing market forces to keep uneconomic coal plants open when cheaper electricity is available. This distortion would directly raise electricity prices, while also complicating the Federal Energy Regulatory Commission’s jurisdiction over energy markets and its obligation to ensure just and reasonable, and not unduly discriminatory rates.
These presidential actions introduce a menu of handouts, exemptions and market interventions aimed at bailing out the coal industry at the expense of competitive energy markets. Courts will ultimately have to grapple with this attempt to undermine our electric grid operators, utilities and markets. If the moves proceed, Americans will face lower royalty revenue, more pollution, increased investor uncertainty and higher electric bills.
Jennifer Danis is the federal energy policy director at the Institute for Policy Integrity at NYU School of Law, where Pello Aspuru is an economic fellow.