Funding a Just Transition Away from Coal in the U.S. Considering Avoided Damage from Air Pollution

Abstract

Abstract Coal is declining in the U.S. as part of the clean energy transition, resulting in remarkable air pollution benefits for the American public and significant costs for the industry. Using the AP3 integrated assessment model, we estimate that fewer emissions of sulfur dioxide, nitrogen oxides, and primary fine particulate matter driven by coal’s decline led to $300 billion in benefits from 2014 to 2019. Conversely, we find that job losses driven by less coal plant and mining activity resulted in $7.84 billion in foregone wages over the same timeframe. While the benefits were greatly distributed (mostly throughout the East), costs were highly concentrated in coal communities. Transferring a small fraction of the benefits to workers could cover these costs while maintaining societal net benefits. Forecasting coal fleet damages from 2020 to 2035, we find that buying out or replacing these plants would result in $589 billion in air quality benefits, which considerably outweigh the costs. The return on investment increases when policy targets the most damaging capacity, and net benefits are maximized when removing just facilities where marginal benefits exceed marginal costs. Evaluating competitive reverse auction policy designs akin to Germany’s Coal Exit Act, we find that adjusting bids based on monetary damages rather than based only on carbon dioxide emissions – the German design – provides a welfare advantage. Our benefit–cost analyses clearly support policies that drive a swift and just transition away from coal, thereby clearing the air while supporting communities needing assistance.