Putting a Carbon Charge on Federal Coal: Legal and Economic Issues

Resources for the Future Discussion Paper 15-13

65 Pages Posted: 26 Jun 2015

See all articles by Alan Krupnick

Alan Krupnick

Resources for the Future

Joel Darmstadter

Resources for the Future

Nathan D. Richardson

University of South Carolina - Law Library; Resources for the Future

Katrina McLaughlin

Resources for the Future

Date Written: March 30, 2015

Abstract

US policy to limit greenhouse gas emissions is currently driven, in part, by the US Environmental Protection Agency’s proposed Clean Power Plan, which seeks a drop in carbon dioxide (CO2) emissions from fossil-fueled power plants — a “downstream” approach to regulation. Here, we consider an alternative, or possibly complementary, regulatory perspective: What is the legal and economic feasibility of imposing an “upstream” CO2 charge on coal production at its extraction site? Specifically, our focus is on leased coal from federal lands managed by the Bureau of Land Management (BLM). Such a carbon charge is designed, in principle, to embody the cumulative “lifecycle” externalities from coal mining to combustion (or other “downstream” utilization). Our legal analysis concludes that BLM has the statutory and regulatory authority to impose such a charge and that it would be best to add it to the royalty rate. But a large fee that would dramatically reduce revenues could invite judicial concern. The economic case is weaker than the legal case because production on state, private, and tribal lands (60 percent of total production) would not be subject to the charge and so could ramp up in response to the economic disadvantage the charge would cause for coal on federal lands, among other reasons. Best would be a comprehensive set of charges on royalties for all fossil fuels, irrespective of ownership.

Keywords: carbon taxes, coal, climate change, pollution strategies, emissions reductions

JEL Classification: Q30, Q52, Q54

Suggested Citation

Krupnick, Alan and Darmstadter, Joel and Richardson, Nathan D. and McLaughlin, Katrina, Putting a Carbon Charge on Federal Coal: Legal and Economic Issues (March 30, 2015). Resources for the Future Discussion Paper 15-13. Available at SSRN: https://ssrn.com/abstract=2622710 or http://dx.doi.org/10.2139/ssrn.2622710

Alan Krupnick (Contact Author)

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

Joel Darmstadter

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

Nathan D. Richardson

University of South Carolina - Law Library ( email )

1525 Senate Street
Columbia, SC 29208
United States

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

Katrina McLaughlin

Resources for the Future

1616 P Street, NW
Washington, DC 20036
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
44
Abstract Views
376
PlumX Metrics