Shutting coal mines is vital if the world is to have any chance of slashing greenhouse gas emissions, but it means job losses. New Mexico is the first US state to enshrine into law a bill aimed at fighting climate change and ensuring a just transition for coal workers
US contradiction
: While US President Donald Trump is pushing back on climate action, even major coal-producing states are closing down fossil fuel power plants
Just transition:
New Mexico is a poor, coal-reliant state with air quality problems. Its climate bill is an effort to deal with all these issues
Clean energy:
The new legislation requires 50% of New Mexico’s retail electricity sales to come from renewable energy by 2030, and 100% to be carbon free by 2045 for major investor-owned utilities and by 2050 for smaller cooperatively owned utilities. Of the 100% carbon-free goal, 80% must be from renewable sources such as wind and solar
Retraining workers:
The legislation creates three funds of around $40 million for worker retraining and economic development. By 2026 replacement electricity generation projects must hire 25% of their construction workers from apprentice programmes set up under the new law.
Key quote:
“The impacts on communities from early retirements of coal plants elsewhere will necessarily be different, but other states should heed New Mexico’s example is tackling the issues directly.”
In the US, states are charging ahead on emissions legislation even as the administration of President Donald Trump — a climate science denier—is moving in the opposite direction. New Mexico recently passed the country’s first climate law that also seeks to alleviate the human cost of transitioning to a new energy economy. The Energy Transition Act (ETA), signed by pro-renewables governor Michelle Lujan Grisham in March 2019, slashes emissions while easing the social and economic consequences of closing a major coal-fired power plant, the San Juan Generating Station, and a nearby bankrupt coal mine. The coal plant is one of the largest in western America. The legislation was ultimately supported by a broad coalition of environmental, labour and business groups, the president of the Navajo Nation and Public Service Company of New Mexico (PNM), a utility and majority owner of the San Juan plant. But discussions leading up to the bill were not easy. The south-western state is one of the most poverty stricken in the US with about one-fifth of people categorised as poor in 2017 data from the US Census Bureau. It also has serious air quality issues in the north-west near two coal plants, one of which is San Juan. Together this requires treading carefully to find ways to protect health and the environment without permanent job losses. Indeed, unsurprisingly perhaps, some grassroots groups, were still left unhappy at the end of the process, suggesting a lack of public consultation and that the final law overly favours PNM at the expense of consumers. New Mexico may only have a population of just over two million, but its clean energy future and ways of managing a just transition for the climate and workers are being watched closely across the US. The state has long relied on fossil fuels for electricity and jobs. Coal fired power plants provided about half of New Mexico’s in-state net electricity generation as of November 2018, says the US Energy Information Administration. For its part, San Juan has been emitting more than 13 million tons of carbon dioxide a year, estimates the environmental group Western Resource Advocates. The new legislation requires 50% of New Mexico’s retail electricity sales to come from renewable energy by 2030, and 100% to be carbon free by 2045 for major investor-owned utilities and by 2050 for smaller cooperative utilities, which are owned by their members. Of the 100% carbon-free goal, 80% must be from renewable sources such as wind and solar.
Retraining and economic development
ETA also establishes a mechanism whereby PNM, which is retiring the San Juan plant in 2022, can refinance its debt in the plant via securitisation through low-cost publicly backed bonds) so it is paid off more quickly and at a lower interest rate. The interest rate yielded by the low-cost bonds will be about 4%, not PNM’s usual after-tax return of more than about 7%. Supporters of the bill contend this will reduce the impact of the plant’s retirement costs on citizens’ electricity bills by about 40%. In addition, consumers will pay less for the plant’s replacement power because it will be from renewable sources, which are cheaper, say the bill’s backers. The legislation sets up three funds totalling approximately $40 million for worker retraining and economic development, says Jeremy Richardson, senior energy analyst with Union of Concerned Scientists, an NGO. More than 1400 power plant staff and coal miners will be laid off by the closings. Further funds of up to $30 million will be available for decommissioning and reclamation costs. In addition, by 2026 replacement electricity generation projects must hire 25% of their construction workers from apprentice programmes set up under the law. The act, moreover, directs replacement power to be sited within the school district surrounding San Juan, which will help compensate for lost tax revenue when the coal plant closes.
A way forward
“We applaud New Mexico legislators for investing in invaluable twenty first-century job training and apprenticeship opportunities,” stated Brian Condit, president of the New Mexico Building and Construction Trades Council, after the bill was passed. In an interview, he conceded that despite his union’s support for the legislation, the money provided for retraining and apprenticeships may not be enough. “What is enough?” he wondered. “But on balance — given the apprenticeship opportunities, the retaining and severance — we have got a definite way forward,” he said. In contrast, when units were previously closed at San Juan and at another nearby coal plant, nothing whatsoever was made available for the labour transition, he added. New Energy Economy, an NGO, is less generous towards the act and led a vociferous opposition campaign. Mariel Nanasi, executive director, vehemently decries a “lack of consultation” of grassroots groups during the bill’s drafting. New Mexico has a large and diverse indigenous population and despite the inclusion of an Indian affairs fund in the act, she says that not all communities were consulted. Nanasi describes the legislation as “unconstitutional” for not giving state regulators full oversight of PNM’s decommissioning costs, unlike new securitisation laws for retiring coal plants in other states such as Colorado, a point of view that supporters of the bill dispute. Nor should the New Mexico legislation allow PNM a 100% recovery of the full remaining value of the plant, as it does under the ETA’s securitisation. “Decommissioning costs are to be paid entirely by ratepayers without review,” she says, which amounts to a consumer-backed “bail-out” for a profit making utility.
Direct action
Other US states are hot on the heels of New Mexico with emissions legislation. Washington State has just passed legislation that requires its utilities to be carbon-free by 2045 and which provides some investment for low-income and rural communities, plus tax breaks for renewables projects if they pay union-negotiated wages. In Colorado, lawmakers have passed two bills requiring a cut in greenhouse gas emissions of 90% by 2050 and establishing a just transition office to disburse grants to coal workers who need jobs in the new energy economy. Colorado’s governor signed the bill into law on 30 May 2019. Securitisation is part of the Colorado legislation and some of the savings generated by the closure of a coal power plant in the state would go to the newly formed state Energy Impact Assistance Authority, to be used to help workers and communities most adversely impacted by the closure. The structure of the securitisation is seen by critics of New Mexico’s law as a better compromise between the competing interests of utility shareholders and consumers of electricity. That is because a lower proportion of the debt on the stranded assets, or obsolete coal plants, would be securitised. America’s policy makers are having to increasingly wrestle with some of the most difficult discussions around the energy transition and New Mexico has been at the forefront. The ETA has its critics and there is clearly much work to be done as the act is implemented, but the legislation is a step forward. As Richardson of UCS says: “New Mexico took a bold step. The impacts on communities from early retirements of coal plants elsewhere will necessarily be different, but other states should heed New Mexico’s example in tackling the issues directly.” He concludes: “New Mexico has thoughtfully addressed the impacts on workers and communities dependent on the coal industry, who would otherwise be left behind in the transition to a clean energy economy.”
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Ros Davidson