A new study by University of Maryland Economist Louis Preonas provides empirical evidence that railroads are likely to cut transportation prices to prop up coal-fired plants if U.S. climate policies further disadvantage coal in favor of less carbon-intensive energy sources.

For his study, Preonas used the drop in natural gas prices over the past decade as a natural experiment for understanding how market pressures effect the price of coal-fired power generation. By analyzing data on coal deliveries, rail carrier use of the U.S. rail network and hourly energy generation from power plants, Preonas showed that as competition from natural gas forced coal fired plants to reduce electricity prices, railroad companies reduced their coal transportation fees. By absorbing some of the cost difference between coal and natural gas, the railroads propped up the coal market to avoid losing business.

  • Sloan the Serval
    4·
    1 year ago

    I’m not surprised. As a bulk good, coal is HIGHLY profitable to railroads as they can just pull coal drags straight from the mines to their destinations. No need to have rolling stock sitting in the middle of a yard waiting to be sorting out or anything like that. Back before all the mergers, there were class-1 lines that tried to avoid hauling anything other than coal.

    That being said, this does mean they’re eating into their own profits in the process, and eventually it’ll hit a point where another bulk good will become more appealing to them.