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Accept Regulations Or Risk Survival: An Important Message to the Coal Industry

December 18, 2015
The threat of global warming is not new. Theories of global warming date back to the 19th century when scientist Jean Fourier discovered that greenhouse gasses trap heat radiated from the Earth’s surface. Contrary to the past, belief in global warming is widespread among scientists today. Despite this, resistance to the U.S. Environmental Protection Agency (EPA)’s efforts to regulate anthropogenic emissions of greenhouse gases is prevalent in the coal industry sector.

by Oumourumana Jalloh, C’17

Recently, Obama and the EPA announced the Clean Power Plan, a plan that would reduce emissions from the power industry by 32 percent by 2030. This announcement led coal industry leaders to vow to fight the plan in U.S. courts. Opposition to the Clean Power Plan will hurt the future of the coal industry for longevity reasons. Longevity is the ultimate measure of a company’s performance. The coal industry is no exception to this concept. It is thus time for the coal industry to accept federal greenhouse gas regulations regardless of its associated costs.

In June, the EPA released “Climate Change in the United States: Benefits of Global Action,” a five year, peer-reviewed report on the benefits of climate change action in five sectors: Health, Infrastructure, Electricity, Water Resources, Agriculture and Forestry, and Ecosystems. Among its many predictions the EPA estimates that the following will result from climate change mitigation:

  • Prevention of an estimated 13,000 premature deaths in 2050 and 57,000 premature deaths in 2100 in the U.S.
  • Avoidance of damages of $2.6-$3.0 billion from poor water quality in 2100 in federal and state governments.
  • Avoidance of damages and adaptation costs of $3.1 billion to coastal property in 2100 as a result of sea level rise and storm surge.
  • Avoidance of the loss of 1.8 billion labor hours in outdoor labor industries in 2100 due to unsuitable working conditions stemming from extreme heat.
  • Avoidance of damages of $1.5-$3.8 billion in the agriculture industry and of $9.5-$9.6 billion in the forestry industry in 2050.[1]

These predictions illustrate that the consequences of global warming inaction can no longer be ignored. Doing so will only hurt the U.S.’s national security in the very near future, which will in turn contribute to an abrupt end of the coal industry.

Change in Global Mean Temperature With and Without Global GHG Mitigation 

The coal industry’s importance to the U.S.’s economy is indisputable. In a Pennsylvania State University study, commissioned by the American Coalition for Clean Coal Electricity, researchers report that by 2015 the coal industry will contribute, both directly and indirectly, “around $1 trillion in gross economic output, $362 billion in annual household income and 6.8 million job-years.”[2]It is also irrefutable that federal environmental regulations do not economically impact the coal industry. In a study conducted by the Council of Industrial Boiler Owners, a study triggered by EPA’s 2014 proposed maximum achievable control technology rule on industrial, commercial, and institutional boiler and process heater operators, researchers find that “every $1B spent on upgrade and compliance costs (from environmental regulation) will put 16,000 jobs at risk and reduce US GDP by as much as $1.2 billion.[3]However, when considering the cost of federal regulation to the coal industry it should be kept in mind that global warming inactions can result to the loss of billions of labor hours  (as noted above), which could economically hurt the coal industry more so than regulations in the long term.

Ian Davis, former managing director of McKinsey & Company, once said “A company that learns to adapt and change to meet market demands avoids not just the trauma of decline or an unwanted change of ownership but also very real transaction and disruption costs.”[4] While clean coal may not be a strong market demand at present, its demand, as the consequences of global warming become apparent, is increasing. Failing to escape from past practices and accept financial costs of responding effectively to global warming will only trigger the end of the coal industry because when global warming becomes an even more visible and non-ignorable threat to the security and prosperity of the U.S., the federal government will have no choice, but to respond vigorously. After all, national security is a top priority of all governments.

It is already evident that the consequences of global warming can impact business longevity. During and in the aftermath of Hurricane Sandy in 2002, business supply chains in the Northeast of the U.S. were severely disrupted.[5]Notably, the shipping and distribution of goods of E-commerce companies, such as Amazon.com Inc., was interrupted. This interruption arose from shortages of fuel, which is vital to the economy and business supply chains. Events like Hurricane Sandy are deterrent examples of the threat that climate change poses to the U.S.’s security and prosperity.

Making profit is central to any business. Endurance through innovation is also vital to the success of any business. With this in mind, I leave the following message to coal industry leaders: accept federal regulation of greenhouse gas emissions and invest in maximum achievable control technology to do so or risk survival later.

References:
  [1] Environmental Protection Agency, “Climate Change in the United States: Benefits of Global Action,” June 22, 2015, http://www2.epa.gov/sites/production/files/2015-06/documents/cirareport.pdf

  [2] American Coalition For Clean Coal Electricity, ” How does coal help our economy?,” http://www.americaspower.org/how-does-coal-help-our-economy

  [3] American Coal Coalition, ” Regulations harming more than just the coal industry,” http://www.americancoalcouncil.org/?page=regs.

  [4] Ian Davis, ” Reflections on corporate longevity,” McKinsey & Company, September 2014, http://www.mckinsey.com/insights/strategy/reflections_on_corporate_longevity.

  [5] Kim Bhasin, ‘Holiday Shopping Is Being Threatened By Crippled Supply Chains, Business Insider, November 5, 2012, http://www.businessinsider.com/retail-supply-chains-hurricane-sandy-2012-11#ixzz3iSW4Qo7p.

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