West Virginia coal country will test power of Democrats’ climate bill

The Washington Post / Jeff Stein

13:25 JST, August 15, 2022

CHARLESTON, W.Va. – Travis Elswick used to spend his days detonating millions of tons of explosives, blowing holes in the Appalachian Mountains so miners could reach the coal underneath. Now he’s considering applying for a job at a battery plant expected to open here soon, aiming to join the growing domestic industry moving the U.S. economy off fossil fuels.

Elswick’s potential jump from a “surface blaster” for coal to a clean energy worker illustrates a key idea behind Democrats’ landmark economic legislation: that the nation can fight climate change by reviving an industrial core hollowed out by decades of globalization and the shift to a service-sector economy. Passed by the House on Friday and soon to be signed into law by President Joe Biden, the Inflation Reduction Act includes hundreds of billions of dollars designed in part to return manufacturing jobs to states like West Virginia that have been pummeled by outsourcing, while aiming to slow global warming in the process.

“When coal leaves, just about everything else leaves, too,” said Elswick, 40, who has bounced between low-paying jobs since being laid off from the Hobet coal mine in 2015, struggling to provide for his daughter, now 11. “I’m excited for what [the plant] can do for the economy here in West Virginia – people here would actually be able to have a decent living, instead of living paycheck to paycheck, scrounging around worried about how they’re going to make it.”

The approach reflects a newfound consensus in Democratic policymaking – one that echoes former president Donald Trump’s promises to rebuild the industrial heartland, but with more money and a focus on the planet. The urgency of making U.S. manufacturing not just cleaner, but bringing it back on shore was amplified by the coronavirus pandemic and Russia’s invasion of Ukraine, which cemented perceptions in Washington that the United States was unacceptably dependent on imports from foreign adversaries. Changing that is central to the Inflation Reduction Act and to Biden’s other key economic measures – such as the anti-China legislation Congress passed last month and the bipartisan infrastructure law adopted last year – in which the federal government is putting enormous money into making the U.S. economy more independent. Democrats say their legislation will lead to millions of new high-paying jobs while simultaneously reducing emissions, leading to a 40% reduction in carbon emissions from their 2003 levels.

“This bill is industrial policy masquerading as energy and climate policy,” said Robbie Orvis, senior director of energy policy design at Energy Innovation, a nonpartisan think tank that provided input on the legislation for Democratic lawmakers. “If you only cared about climate, you would not necessarily do it this way. But Democrats have bigger ambitions – bringing back a certain type of employment and reducing dependency on foreign energy.”

Those lofty goals could crash into innumerable obstacles, though, and even economists who generally support the legislation are skeptical of how much it can revive places such as West Virginia. Clean energy jobs like the one Elswick wants represent only a fraction of the national economy now. And they may never employ as many people as fossil fuel energy did at its peak: Because the technology required to run clean energy operations tends to more efficient, each plant requires far fewer jobs.

“This bill is deficit reduction, climate change, and health care – the legislation would have a tiny effect on economic growth,” said Jason Furman, who served as a senior economist in the Obama administration and is now an economics professor at Harvard. “The reason to do this is because carbon is a problem, not because you want to invent a problem to create jobs and help the economy.”

Using more renewable energy would shift the nation away from foreign oil supplied by adversaries like Russia or unreliable allies like Saudi Arabia, but the equipment and parts to make greener power are themselves often manufactured abroad – which means the renewable sector is also heavily dependent on imports. The legislation attempts to counteract decades of global economic forces that have uprooted and sent supply chains all over the world in a search for cheaper labor. But poorly paid overseas workers often mean lower costs for consumers, and some economists say that moving away from cheap imports may conflict with the administration’s determination to get prices down as fast as possible. Other economists dispute this, with some analyses finding that the bill could dramatically lower consumer costs by making U.S. energy significantly more abundant and free from geopolitical price shocks.

The bill will become law soon, but its ideological contradictions are already beginning to surface.

Automakers have spent the week since the Senate approved the bill warning that it could make tax credits for purchasing electric vehicles harder for people to get, because the credits will only be available in full to firms that produce battery components in nations that are U.S. trading partners. The idea behind that requirement is to accelerate U.S. energy independence and the process of bringing manufacturing jobs back home, but some industry groups have said the goals are impossible to achieve and could put the bill’s climate targets in jeopardy.

Similarly, in part due to the demands of Sen. Joe Manchin, D-W.Va., Democrats agreed to new subsidies for fossil fuel producers and the bill requires the government lease as much federal land to oil and gas producers as it does to producers of wind and solar power. That reflects the tension between the legislation’s climate goals and its economic aspirations to revive coal country, although climate experts say the net impact of the bill would still be a dramatic reduction in U.S. emissions.

“Both the Democratic left and the populist right have made it a priority to bring back jobs to blue-collar America. But that goal may be at odds with other goals, because pushing manufacturing into America could make goods more expensive at a time where you’re trying to keep inflation down,” said Brian Riedl, an economic policy expert at the Manhattan Institute, a center-right think tank. “Producing in America is often more expensive than producing in China, which is why it was off-shored in the first place.”

The bill represents a shift from a previous big idea in fighting climate change: a tax on carbon emissions. After years of pushing, policymakers realized carbon taxes or cap-and-trade systems were simply not politically tenable, because they would make American consumers pay more. Democrats abandoned carbon taxes in favor of federal subsidies that aim to make renewable energy cheaper than fossil fuel power – a change that depends on reviving U.S. manufacturing.

“There’s very good justification for linking climate policy to industrial policy: I’ve been convinced this is the only way to move forward,” said Adam Posen, president of the Peterson Institute for International Economics, a D.C.-based think tank. “But there’s a nostalgic, backward-looking part of industrial support that is actively countering what you’re trying to do on climate – some of it is a little two steps forward, one step back, even if you come out ahead.”

The economic stakes are immense in all of Appalachia, but especially in West Virginia, which went from a central part of the economy to one of the poorest states in the country as people, capital and industry fled. In the 1950s, more than 100,000 West Virginians worked in coal, which powered American industry. That number remained as high as 54,000 into the 1980s. It has continually to gradually decline since then, hitting just 12,000 workers – the lowest figure since 1890, early in the Industrial Revolution – last year, according to federal data.

Into the late 1970s, West Virginia had “relatively good” poverty statistics and unemployment numbers, as well as above-average wages, due to booming steel, oil and coal towns, according to Ted Boettner, senior researcher with the Ohio River Valley Institute, a think tank.

The West Virginia steel company that was once the state’s largest employer paid roughly $16 an hour on average in the 1970s, whereas Walmart – now the state’s largest employer – pays half its workers under $15 an hour, according to Boettner. That comparison does not account for inflation.

“When we went from a goods-producing economy to a service economy, we were just in the worst possible position,” Boettner said of West Virginia.

Green energy jobs have come nowhere close to meeting the gap. In 2020, the state only had about 400 workers in solar, 400 in wind and 350 in battery storage, according to Energy Department data. At one of West Virginia’s biggest wind farms, located above an impoverished former industrial town in Mineral County, Clearway Energy Group manager Douglas Vance acknowledged that coal-fired plants mean far more jobs per kilowatt-hour of energy produced: Vance’s cousins, for instance, still work at a local coal mine with more than 50 workers. The wind plant has roughly five full-time employees, by contrast.

“With a coal-fired power plant, there’s a lot more systems involved – there’s a lot more things you have to do, which is why there are more people,” Vance said. “It’s a lot more labor-intensive.”

The White House, Manchin and many Democratic economists are adamant that the labor gains will come. An analysis by economists at the University of Massachusetts at Amherst and BlueGreen Alliance, an advocacy group, has found that the legislation will produce 9 million high-paying jobs over the next 10 years, with close to 1 million of them in “clean manufacturing” like making wind turbines, retooling factories and producing electric vehicles, among other projects. U.S. manufacturing currently employs roughly 13 million people.

The sheer scale of the federal investment is massive and unprecedented, and other experts point out that much smaller expenditures in the past have had transformative impacts on their own, though they weren’t enough to replace the lost jobs in places like West Virginia. Under President Barack Obama, Democrats in Congress approved roughly $90 billion in clean energy subsidies in 2009. An investment from that fund helped birth Tesla, now a $900 billion international electric car and solar power behemoth that is accelerating the renewable energy transition.

The climate investment from the Inflation Reduction Act is roughly four times bigger, and it stretches over a much longer time. The legislation extends for at least 10 years on hundreds of billions of dollars in solar, wind and other renewable production tax credits that had periodically expired, and creates a brand new bonus credit for producing it in “energy communities” such as West Virginia. It also includes more than $50 billion in direct investments for clean manufacturing, said Ben Beachy, who specializes in industrial policy at the BlueGreen Alliance. Those could, proponents say, give U.S. manufacturers the assurance that the federal government is committed to subsidizing clean energy jobs for the long haul, especially when coupled with the semiconductor bill and the infrastructure law.

“What we can’t capture in our models is that this is going to change the course of history – it will change the momentum by unlocking feedbacks that make sure these transitions accelerate, building an industrial base and all the jobs and economic interests that go with it,” said Jesse Jenkins, an energy modeler at Princeton University.

The opportunities in West Virginia are indeed materializing. In South Charleston, the Vancouver-based firm GreenPower Motor Company is set to open a new plant next month to assemble and manufacture school buses that run on electric batteries. Currently, GreenPower only makes these buses in its California facility, but it believes its West Virginia plant will soon supply the Eastern Seaboard from Florida to New York and possibly Montreal.

The company’s bestseller, the “BEAST” (or “Battery Electric Automotive School Transportation”) glides almost inaudibly, its motor tucked away below the windows on the right side. Mark Nestlen, the company’s vice president of business development and strategy, said West Virginia emerged as a location because of the logistical and trucking routes that made it once an industrial powerhouse.

That opportunity is made much more attractive by the bipartisan infrastructure law, which provided $5 billion for schools to buy electric buses, as well as other subsidies such as provision in the Inflation Reduction Act that provides a particular manufacturing incentive for former coal-producing regions, like West Virginia. Currently, diesel-powered buses cost roughly $200,000 less to produce than the new renewable buses – but federal subsidies make the BEAST cost-competitive for districts anyway, as well as safer for children who no longer have to breathe in exhaust fumes.

“A lot of people at first will say, ‘Electric school buses in coal West Virginia? That does not make any sense,'” Nestlen said. “But when you look at West Virginia, there’s tremendous opportunity.”

Other opportunities are developing across the state. At a White House event last December, Sanjiv Malhotra, the chief executive of battery manufacturer Sparkz, began talking with Phil Smith, the Washington-based lobbyist for the United Mine Workers of America. Malhotra, an immigrant whose father worked at a coal mine in India, and Smith began talking about Sparkz’s interest in a new production plant to supply batteries made from more sustainable elements for agriculture and other heavy industry, with the company pitching itself as able to free America from dependence on Chinese parts.

The company started researching West Virginia, and Malhotra found a lot of what he was looking for, including a workforce still highly equipped for manufacturing, abundant water and other natural resources, and strong logistics capacities. Citing the potential of the Inflation Reduction Act’s tax credits, Sparkz is now suggesting it could hire as many as 3,000 workers there. Elswick, the former “surface blaster” at the Hobet coal mine whose father and grandfather also worked at the same mine, could be one of them. That would not offset the 40,000 coal mining jobs West Virginia has lost since 2012, but it would be a start.

“These are very proud folks who for generations were working in coal-mining and bringing energy to the United States,” Malhotra said. “Their work can be so crucial . . . Bringing such folks back to a well-paying job where we can put food on the table – it’s patriotic power.”