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Analysis: Falling Coal Demand


ARC ProjectThe Howard H. Baker Jr. Center for Public Policy has been involved in a major research endeavor funded by the Appalachian Regional Commission (ARC), in partnership with the Boyd Center for Business and Economic Research and the Center for Transportation Research, and West Virginia University.

Dr. Matt Murray and Dr. Charles Sims are leading the effort out of the Baker Center.  The focus of the research is the coal industry ecosystem within the Appalachian Region and the implications of declining coal employment and production for economic development.  A draft final report was provided to ARC in June.

“This project represented a significant opportunity to draw upon the economic development expertise of the university to address a pressing challenge”

Many areas of Appalachia have been devastated by the falling demand for coal.  For the nation as a whole, there were almost 800 thousand coal jobs in the 1920s.  By 2015, the number of jobs had slipped to 65,971.

For the ARC region, employment stood at just 38,193 in the same year. These employment setbacks have rippled across the region leading to widespread unemployment and underemployment, and aggravating already dire socioeconomic conditions.

The report that the UT-WVU team has developed provides an overview of coal employment and production in the Appalachian region, an analysis of the coal industry supply chain and regional coal-fired power plants, an examination of the effects of coal activity on the transportation infrastructure and the implications of a shrinking coal ecosystem on industry occupations and government revenues that support elementary and secondary school funding.

Charles Sims, director of the Baker Center’s Energy & Environment Program and associate professor of Economics, said “The team found that the closing of coal-fired plants had very little to do with the fluctuation in coal prices due to long-term coal contracts in the electricity generation industry.” Instead he noted that primary risk factors shortening the economic lifetime of coal-fired plants include “the cost of constructing the plant, the value of the land where the plant is located, macroeconomic factors, and whether the plant is in a regulated market.”

Together the findings are intended to help federal, state and local policymakers address the consequences of falling coal demand on the Appalachian region.

“This project represented a significant opportunity to draw upon the economic development expertise of the university to address a pressing challenge,” said Matt Murray, director of the Baker Center and associate director of the Boyd Center. “Partnering with West Virginia University added to the team’s capabilities and places the project in the center of coal country.”

The research team will be traveling to Washington D.C. soon to present their findings to the staff of the Commission.  The team will then return to their respective institutions to finalize the program of work.

 


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