Is coal mining still economically viable without government subsidies?

Why coal looks cheap only because we ignore its real costs

The short answer is no — coal mining is not economically viable without government subsidies, but the key is understanding what counts as a subsidy. A 2021 IMF analysis calculated that global fossil fuel subsidies were $5.9 trillion in 2020, which is about 6.8% of the entire world's economic output [4]. Crucially, only 8% of that was explicit subsidies (like direct payments or tax breaks for production). The other 92% was implicit subsidies — meaning coal companies are not charged for the damage their product causes to the environment and human health [4]. If coal miners had to pay for the carbon emissions, local air pollution, and water contamination they create, the price of coal would skyrocket, making it uncompetitive with wind and solar.

To put that in human terms: every ton of coal burned imposes costs on society — from asthma hospital visits to crop damage to climate-driven disasters — that are not reflected in the market price. The IMF estimates that if these costs were fully priced in, global CO2 emissions would fall 36% below baseline levels by 2025, and 0.9 million premature deaths from local air pollution would be prevented each year [4]. So coal mining survives economically only because governments effectively subsidize it by not charging for the damage.

Clean energy is already undercutting coal on price

Even before accounting for hidden environmental costs, renewable energy has become cheaper than coal in most markets. A 2023 U.S. Department of Energy study modeled the impact of the Inflation Reduction Act and Bipartisan Infrastructure Law, which together commit over $430 billion to clean energy and climate programs through 2031 [1]. The analysis found that these policies are expected to drive massive growth in zero-carbon electricity, reduce costs for consumers, and cut emissions — all while making coal increasingly uneconomical [1]. The study also warned that if clean technology costs continue to fall as expected, coal's market share will shrink even faster [1].

This is not just a U.S. story. Globally, the International Energy Agency's scenarios for meeting climate goals all require a radical reduction in coal use for power generation, replaced by renewables [3]. While some argue that coal's vast reserves and existing infrastructure give it an advantage, the economic math has flipped: building new wind or solar farms is now cheaper than running existing coal plants in many regions, even without subsidies. The only way coal competes is if it doesn't have to pay for its pollution.

Where coal still makes money, it's because of policy protection

In countries like South Africa, coal mining does contribute significantly to the economy — boosting exports, GDP, and employment — but this comes at a high environmental cost, including damage to water and air quality that harms human and animal health [2]. The paper notes that while coal provides short-term economic benefits, the long-term environmental threats may outweigh them, and policies like damage land taxes or environmental bonds are needed to address the harm [2]. These are exactly the kinds of costs that the IMF study identifies as being implicitly subsidized.

The political reality is that coal continues to operate because governments choose not to enforce full-cost pricing. The G20 countries committed in 2009 to reform fossil fuel subsidies, and this commitment has spurred action by institutions like the World Bank and OECD [5]. But progress has been slow, and many countries still provide direct and indirect support to coal. Without these policy protections — whether explicit subsidies or the implicit subsidy of not charging for pollution — coal mining would not be economically viable in almost any market today.

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