Obama: Bankrupt the Coal Industry

According to statements by the candidate, anyone wanting to build a coal plant would be bankrupted if his plan to deal with greenhouse gasses (GHGs) is implemented.

“I was the first to call for a 100 percent auction on the cap and trade system, which means that every unit of carbon or greenhouse gases emitted would be charged to the polluter,” Obama continued. “That will create a market in which whatever technologies are out there that are being presented, whatever power plants that are being built, that they would have to meet the rigors of that market and the ratcheted down caps that are being placed, imposed every year.

“So if somebody wants to build a coal-powered plant, they can; it’s just that it will bankrupt them because they’re going to be charged a huge sum for all that greenhouse gas that’s being emitted.”

Must be great having a magic energy pony. And those costs wont be borne simply by the polluter either. I love the simpleton economics of Presidential Candidates. “Those guys are bad, so we’ll make them pay, not you the little people.” Nevermind that most businesses try to pass on as much costs to the consumer as they can. And taxes (per unit taxes) are borne by both the consumer and the producer.

Of course the Obama campaign is saying the comment was taken out of context (you can read the entire comment here). Thing is I’m not sure the “out of context” defense works. Obama doesn’t say, “If they try to build a coal plant with the old technology it will bankrupt them.” He says if they try to build a coal plant it will bankrupt them. Maybe he meant the former, only certain technologies will work with a coal plant, but that isn’t what he said.

And even if he did mean that and had said it, McCain’s robocall is still right. Increasing the costs for running a coal plant will reduce the number of coal plants and will reduce the demand for coal which in turn will mean less coal mining jobs. Pretty simple really, and a bit of a dumb move on Obama’s part since Pennsylvania is a state that McCain would love to move into his column.

FILED UNDER: Campaign 2008, Economics and Business, Environment, Government, Science & Technology, US Politics,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. just me says:

    Our governor signed a green bill that would require energy producing companies (gas and electric) to upgrade and do certain things cleaner.

    The electric company is now asking to increase rates about 10% in order to pass the cost on to the consumer.

    Companies will always try to pass any extra costs to the consumer-it isn’t the companies that Obama would bankrupt but those who use the energy produced-or at least it would leave many people choosing between heat or food.

  2. Anon says:

    I wouldn’t say that the comment is taken out of context, but if you read the whole thing it is clear that he meant to say that if you build one with old technology. He simply mis-spoke. (Note that I’m specifically not addressing what he was really thinking, but just that, sincere or not, he intended to add “old technology”.)

    In general, I think most of us don’t realize how easy it is to misspeak. I give four lectures a week, and I’m sure that if someone were to pore over my words, I say all kinds of things I didn’t exactly mean.

    I think this applies across the political spectrum. For example, I think the “macaca” incident was totally blown out of proportion, and I think the media was unfair to Quayle.

  3. spencer says:

    And “some” people wonder what is wrong with our system.

    With this type of rational analysis is it any wonder that the republicans have created the mess that we are in.

  4. Spoker says:

    Of course BHO didn’t say this. Someone right wing smear artist had to make this up. Look for the edit marks in the video. Meanwhile, better plan on asking for a federal handout to help pay for it!

  5. With this type of rational analysis is it any wonder that the republicans have created the mess that we are in.

    If only there weren’t any Republicans…

  6. JKB says:

    This is out of context only in that it was only meant for greenies in California and not to be heard by working people in coal country.

    Still, it’s okay. Obama is only going to take out of the other guy’s side of the bucket. Our side in A-ok.

  7. Brett says:

    Keep in mind that the idea itself isn’t bad; CO2 is an externality of coal power, and this attempts to factor that in to the real costs of coal power while letting the market decide rather than simply implementing an across-the-board carbon tax.

  8. Steve Verdon says:

    The electric company is now asking to increase rates about 10% in order to pass the cost on to the consumer.

    Which follows from established rate doctrine. No big deal here, at least that the electric company is doing it.

    I wouldn’t say that the comment is taken out of context, but if you read the whole thing it is clear that he meant to say that if you build one with old technology. He simply mis-spoke.

    Ahhh, the “he just mispoke” defense. Yes he might have meant that, but then again maybe he didn’t. It isn’t at all clear, IMO.

    Keep in mind that the idea itself isn’t bad; CO2 is an externality of coal power, and this attempts to factor that in to the real costs of coal power while letting the market decide rather than simply implementing an across-the-board carbon tax.

    Well yes and no. The number of carbon credits/amount of emissions is determined by the government. In a sense it is like a tax. A cap-&-trade system would allow efficient firms to sell to inefficient firms, and those that just can’t cover the costs–i.e. spend too much on emission credits, they shut down. So it combines the notion of a tax with the efficiency of the market…provided you get the right amount of credits to begin with. That last assumption is the hard part and could be a political hot potato.

    With this type of rational analysis is it any wonder that the republicans have created the mess that we are in.

    Better having Republicans than feudalists such as yourself Spencer.

    Sheesh.

  9. rodney dill says:

    A tax increase without raising taxes.

  10. sam says:

    What he also said was this:

    The only thing that I’ve said with respect to coal — I haven’t been some coal booster. What I have said is that for us to take coal off the table as an ideological matter, as opposed to saying if technology allows us to use coal in a clean way, we should pursue it, that I think is the right approach. The same with respect to nuclear. Right now, we don’t know how to store nuclear waste wisely and we don’t know how to deal with some of the safety issues that remain. And so it’s wildly expensive to pursue nuclear energy. But I tell you what, if we could figure out how to store it safely, then I think most of us would say that might be a pretty good deal.

  11. sam says:

    What he also said was this:

    The only thing that I’ve said with respect to coal — I haven’t been some coal booster. What I have said is that for us to take coal off the table as an ideological matter, as opposed to saying if technology allows us to use coal in a clean way, we should pursue it, that I think is the right approach. The same with respect to nuclear. Right now, we don’t know how to store nuclear waste wisely and we don’t know how to deal with some of the safety issues that remain. And so it’s wildly expensive to pursue nuclear energy. But I tell you what, if we could figure out how to store it safely, then I think most of us would say that might be a pretty good deal.

  12. sam says:

    What is with this website? Are we going through some proxy?

  13. Zelsdorf Ragshaft III says:

    Sam, what someone should tell Obama is this nation needs and runs on energy. Not some future dilitium chrystals from Star Trek but what is available now. His stupid statement we have no safe way to store nuclear waste is false. No one has ever been injured from leaking radiation from one of our storage sites. The concept of having to store nuclear waste for 100 centuries is stupid beyond belief. No one knows what that far in the future holds but we should starve and scrimp and save to prevent some far in the future mishap is the thinking of a fool. If Obama is elected his will be a failed President because of his inexperience and ignorance of his own limitations. His ego is huge, his ability small.

  14. Drew says:

    We all wish that certain human activities did not have nasty side effects. If if you make steel you create pollution. If you refine oil you make pollution. And if you use coal to make electricity (and coal is the source of 50% of electrical power generation) then you are going to have pollution.

    Our efforts to manage this problem should not be reckless or simplistic with regard to the realities of migrating to newer technologies. The dislocations of both human and monetary capital in such an activity are huge. Whether Obama was referring to new or old plants is almost irrelevant. Threatening to “bankrupt” power providers who don’t share a his simple worldview (because they obviously understand and must deal with the economic problems involved) demonstrates the naivete and obvious inexperience that his critics have poited out since his candidacy was announced.

    In 1980 I wrote up a study titled “Sulfur Fixation During Coal Gasification.” The thrust of the study was to examine the thermodynamics and kinetics of reducing sulfur emissions in fluidized bed boilers by dissolving sulfur in the iron that naturally occurs in coal. I thought I was saving the world. Then cold, hard economic realities and practicalities set in. Of course, I was only 20.

    At the age of 47, Obama should know better than to be spouting off about “bankrupting” industries facing complex problems.

    Strike 1 for the man who is not yet ready.

  15. PD Shaw says:

    Externalities is an interesting concept when China will probably build two coal power plants for every one that Obama would bankrupt.

    But basically I don’t think Obama understands cap-and-trade. A feature of cap-and-trade is not the bankrupting of new plants, but the shutting down of inefficient plants.

  16. just me says:

    I wonder if Obama even realizes the US Navy has had nuclear powered ships longer than he has been alive?

    If he is so unsure of how to store waste safely, why doesn’t he go talk to France. They have used nuclear for years, and I can’t think of too many French nuclear waste problems.

    Obama has bought into the anti nuclear crowd. The problem isn’t that we don’t know how or can’t store the waste safely, it is that nobody wants the stuff stored where they live or in their state. The problem isn’t safety but more of a “NIMBY” problem.

    Oh and as for plant safety-the Navy has managed to run nuclear powered ships without any problems. Maybe Obama should talk to some of the people who maintain and run our nuclear navy.

  17. Patrick says:

    Nuclear energy should be PART of our energy policy, which I think both candidates agree on. Neither one has the right answer here.

  18. rodney dill says:

    I gave Obama the benefit of the doubt for intelligence, as he certainly seems intelligent, but once you get below the surface he really comes across as a dim bulb.

  19. al bee says:

    There is always an excuse when Obama blows it. The reader just doesn’t understand or appreciate Obamas genius.

    Obama is never wrong. I’m waiting for the other shoe to drop when Obamas infallibility is decreed.

    Kim, Chavez and now Obama. After the announcement of infallibility will come Socialism.