Understanding Why Coal Mines Close
WASHINGTON—Coal mining is in decline, yet not going quietly. The competition is rough these days. It must compete with improved natural gas production, with wind power, and with greater energy efficiency. Production has declined by 38 percent since its peak in 2008. Between 2008 and 2015, coal mining employment declined by 23 percent while 31 percent of coal mines closed, mostly in the eastern United States. Yet, even though coal mining accounts for a small share of total US employment, it still can contribute substantially to local economies like those found in West Virginia. And it still engenders heated discussions that range from small-town diners to forums of 2016’s presidential debates.
It is surprising, then, how little research presently exists to distinguish among the potential causes of recent mine closures. Today, a new study posted by Resources for the Future (RFF) looks to address that need. Coal Demand, Market Forces, and US Coal Mine Closures for the first time utilizes data on coal mine and power plant operation to estimate the impact of supply and demand factors on mine closure. The authors are Brett Jordan, University of Anchorage; Ian Lange, Colorado School of Mines; and Joshua Linn, University of Maryland and Resources for the Future.
Their research models a coal mine’s profitability and closure decision. This approach allows for simulation of how profits and closure decisions would change under a number of counterfactual scenarios.
The authors conclude: “We find that rising production costs explain about two-thirds of the observed coal mine closures caused by declining profits between 2002 and 2012. Natural gas prices and reduced electricity consumption independently explain about one-third of the closures.”
They further note: “While this paper has addressed four potential causes for the decline in Appalachian coal mining, our modeling framework is appropriate for the evaluation of other policies and market forces that may have affected this industry and region. These include the labor to capital substitution that has occurred within and between coal basins (especially since 1990), emissions regulations directed at coal-fired plants, and environmental regulation directed at coal mining operations, particularly restrictions around eastern US surface mining (so-called ‘mountain top removal’).”
Read the full study: Coal Demand, Market Forces, and US Coal Mine Closures.
Resources for the Future (RFF) is an independent, nonprofit research institution in Washington, DC. Its mission is to improve environmental, energy, and natural resource decisions through impartial economic research and policy engagement. RFF is committed to being the most widely trusted source of research insights and policy solutions leading to a healthy environment and a thriving economy.
Unless otherwise stated, the views expressed here are those of the individual authors and may differ from those of other RFF experts, its officers, or its directors. RFF does not take positions on specific legislative proposals.
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