Revenue at Risk in Coal-Reliant Counties
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This paper examines the implications of a carbon-constrained future on coal-reliant county governments in the US. We review modeling projections of coal production and argue that some local governments face important revenue risks. Complex systems of revenue and intergovernmental transfers and insufficiently-detailed budget data make it difficult to parse out how exposed jurisdictions are to the coal industry. A look at three illustrative counties shows that coal-related revenue may fund a third or more of their budgets. When extrapolated outside the sample, our regression analysis of 27 coal-reliant counties suggests that the demise of coal could lower these counties’ revenue by about 20 percent. This does not account for the potential downward spiral of other revenues and economic activity as the collapse of the dominant industry erodes the tax base. Coal-dependent communities have issued outstanding bonds that will mature in a period in which climate policy is likely. Our review of illustrative bonds indicates that municipalities have not appropriately characterized their coal-related risks. Climate policies can be combined with investments in coal-dependent communities to support their financial health. We discuss how a small fraction of revenue from a federal carbon price could fund assistance to coal-dependent communities and workers.
The authors would like to thank the editors of EEPE for their helpful feedback and suggestions. The authors would also like to acknowledge the contributions of Ali Zaidi, Edwin Saliba, Hao Wang, Jason Bordoff, Mathew Robinson, Artealia Gilliard, Ron Minsk, Genna Morton, Stephanie Damassa, and Anna Gossett. The views expressed in this report should not be construed as reflecting the views of the Columbia SIPA Center on Global Energy Policy, the Brookings Institution or any other entity. The words “we” and “our” refer to the authors’ own opinions.
This work was made possible by support from the Center on Global Energy Policy (CGEP) and the Laura and John Arnold Foundation. More information about CGEP is available at: https:// energypolicy.columbia.edu/about/partners. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.