If Congress regulates the emission of greenhouse gases, two things are certain for West Virginia: Demand for coal will drop, and the price of electricity will rise.

The thinking is simple. Of all the fossil fuels, cheap but carbon-rich coal will be affected by greenhouse gas legislation more than any other.

That means coal's biggest buyers, electric power producers, will shift to other, more expensive fuels. And because coal fuels nearly all of West Virginia's electricity and more than half the nation's, the price of electricity here and everywhere will go up.

But how much will coal demand drop? How much more will electricity cost? These crucial matters are far from certain.

Demand for Coal

"People are hesitant to put out even a range" for the effect on coal, said spokesman Dan Riedinger of the Edison Electric Institute.

The EEI represents shareholder-owned power companies, including West Virginia electricity providers American Electric Power and Allegheny Energy.

"Depending on what type of policy measure is enacted, that will certainly have an impact on a state like West Virginia that has a lot of coal resources," he said.

One report has placed specific numbers on coal use. It came from the U.S. Energy Information Administration in March 2006.

A very modest scenario in the EIA analysis -- one that would put greenhouse gas emissions in 2030 at, not even below, 2004 levels -- steps coal-fired generation down from 2,000 billion kilowatt-hours in 2004 to about 1,200 in 2030.

Most of the greenhouse gas bills under consideration in Washington would go much further.

"AEP keeps a pretty close watch on those," said Tim Mallan, environmental affairs manager for AEP's Appalachian Power.

The utility has a vital interest in the matter. Its need for 75 million tons of coal a year makes it the largest buyer in North America, according to Mallan.

In general, he said, current proposals are in line with AEP's preferences, assuming some form of greenhouse gas regulation is coming.

That is, the proposed bills' cap-and-trade approach would rely on the market to identify the most cost-efficient places for reductions rather than dictating them facility by facility. The bills also would regulate not just carbon dioxide but all greenhouse gases. And all but one would apply not only to the power sector but also economy-wide.

Matt Preston, a partner at energy market consultants Hill & Associates, has analyzed the measures before Congress, including Senators Jeff Bingaman, D-N.M., John McCain, R-Ariz., and Joseph Lieberman, I-Conn.

"Bingaman's proposal ... would slow the growth of coal but wouldn't reverse the growth of coal probably," he said.

"McCain-Lieberman puts a hard, fixed cap on production, and I think that has a potential to flatten coal out completely," he added.

There is a limit to how quickly utilities could shift away from coal, Preston said.

"The first replacement that you have for coal is natural gas, which would then become very expensive," he said. So at least in the several years that it would take to increase natural gas supplies, "you bump up against either turning out the lights or burning coal regardless."

There's one especially big wild card: whether it will become possible to capture and store, or sequester, the carbon, rather than releasing it to the atmosphere.

"If there's no sequestration, one thing will happen to the coal industry, and if there's sequestration it's another," said Joe Lovett, executive director of the Appalachian Center for the Economy and the Environment. "It's a get out of jail free card for the coal industry."

Preston would agree.

"Some of the ... bills that call for 80 percent reduction (in greenhouse gas emissions) by 2050, it's almost impossible to see how they could actually be implemented. They would almost have to have a viable CO2 sequestration technology," he said, "in which case coal continues to be a viable energy fuel."

The Price of Electricity

At an average of $5.13 per kilowatt-hour, West Virginia had some of the lowest rates for electricity in the nation in 2004, according to the EIA. The U.S. average was $7.62.

Those low rates are one reason West Virginia has so many energy-intensive industries -- industries that will face increased costs in a carbon-constrained economy.

Just as for coal price and demand, sources for this story were not ready to put a range on those increases.

However, the EIA's 2006 analysis of a modest greenhouse gas scenario did offer figures: 15 percent higher nationwide than "business as usual" by 2020 and 29 percent higher by 2030.

Several sources for this story noted that even if coal remains a viable fuel in the long run through sequestration, the plants that allow for capturing carbon are more expensive than conventional plants to build, and the process of sequestration itself also will cost money.

Preparing Our Economy

If the demand for coal were to drop a lot, it would be a big blow to West Virginia's economy, said George Hammond, research associate professor in West Virginia University's Bureau of Business and Economic Research. The BBER prepared Consensus Coal Forecasts in 2004 and 2006.

"We would see significant drops in employment. Coal remains a large employer in West Virginia, much larger than nationally," Hammond said.

"We would see major declines in income, and it would significantly affect the state budget," he continued -- both through reduced coal severance taxes and through secondary reductions in personal income tax and sales tax collections. "Those impacts would be large and severe."

The increased price of electricity "would be felt nationwide, and initially it would be a supply shock," he said. "Essentially it raises the cost of doing business across the board, which tends to reduce economic growth."

It would be best for West Virginia, Hammond said, if the regulations were phased in over time.

"There would be the possibility of gradually reallocating resources to other sectors of the economy, so that as employment and income shift away from the coal sector it would find uses in other sectors or other regions of the nation," he said.

Given the pace at which policy affects the structure of the economy, Hammond said the state needs to start preparing now for regulations that could come in the next four years in this Congress or the next.

"It does, I think, appear that those kinds of restrictions are coming in some form," he said. "Now is the time for West Virginians to focus on increasing their educational attainment, their skill levels, and the state has begun to make some headway in terms of improving the business climate; we need to continue along those lines."

Echoing others who say it's too soon to know how greenhouse gas regulation will affect coal and electricity, Hammond noted that the devil will be in the details.

"It'll be important to look at the actual plans as they get formulated and to figure out exactly what those impacts will mean," he said, "and in particular to think about the timing of them -- and that will help in terms of planning the policy response."

Or the state could be more proactive.

"West Virginians should be very, very observant and very, very active in ensuring that a rational, fair process is developed for any kind of greenhouse gas emission controls," said AEP's Mallan.