This paper looks into the long-term implications of the federal climate policies on the coal-dependent counties’ economy across the U.S. and discusses what it would mean for future coal production. Additionally, it examines a potential spill out to the national economy through the national bonds market and proposes the measures necessary to both reduce the risks associated with bonds issued by coal jurisdictions and ensure the economic resilience of those counties.

The authors argue that coal mining across the U.S. has declined in the last decade, due in part to new environmental regulations imposed by the federal government. Focusing specifically on three counties (Mercer, Boone, and Campbell), they further analyze the regions’ fiscal exposure to coal and various carbon pricing scenarios, and predict a fall in the counties’ revenues under stringent climate policy scenarios.

Additionally, the authors examine the bonds issued by coal jurisdictions, arguing that municipal bonds are becoming volatile due to “budget pressure” and extreme weather conditions. Moreover, they caution investors against the “vague and incomplete” disclosures of risks associated with coal assets, citing the economic defaults of late 1970 and the early 1980s due to their negligence on risk exposure associated with nuclear power bonds. The authors conclude with recommendations for local economic diversification, urging the federal government to invest more in programs that ensure worker retraining and the provision of other social benefits. They further suggest combining climate policies with investment to ensure the financial health of coal-dependent counties.