A surprise beneficiary in the budget mega bill signed by President Donald Trump on July 4 is a type of coal used in the production of steel. Companies that mine metallurgical coal are in line to receive a 2.5 percent tax credit.
The bill slashes Medicaid, food benefits for lower-income Americans. It also erased many of the subsidies for clean energy enacted by the Inflation Reduction Act, signed by President Joe Biden in 2022.
Making met coal cheaper, mostly for other countries
But the One Big Beautiful Bill Act also adds a subsidy for a specific type of coal – metallurgical, or “met” coal, used in steelmaking. The bill reclassified metallurgical coal as a “critical mineral,” making it eligible for a tax credit that had gone mainly to materials used in clean energy.
Metallurgical coal is used to make steel in a blast furnace, and is a significant greenhouse gas polluter: Globally, steel accounts for around 10 percent of planet-warming greenhouse gas emissions.
However, most steel made in the U.S. does not use coal; it comes from scrap metal and iron ore melted in electric-powered furnaces. So about 70 percent of the 70 million tons of metallurgical coal produced in the U.S. – primarily from Appalachian states like Pennsylvania, West Virginia, Virginia and Kentucky – is shipped overseas.
The top destinations for U.S. met coal are India, Brazil, Japan, the Netherlands and China.
“It’s going to make iron and steel produced outside of the U.S. cheaper,” said Hilary Lewis, steel director at the environmental nonprofit Industrious Labs. While Trump has imposed 50 percent tariffs on steel from other countries, the effect of this tax credit will counteract that tariff.
“That steel, it will be even cheaper,” she said.
Report: Coal-based steelmaking causes hundreds of premature deaths and billions in health costs nationwide
But Ben Beakes, president of the Metallurgical Coal Producers Association, said even though met coal is mostly exported, it remains important to the domestic economy.
“Twenty-five percent (of it) is used right here in America in our steel mills in order to make steel. So it still is a huge component of our infrastructure and the rebuilding of our country,” Beakes said.
Pennsylvania produces approximately 5 million tons of metallurgical coal annually, mostly going to domestic steelmakers, such as U.S. Steel, according to Rachel Gleason, executive director of the Pennsylvania Coal Alliance.
“The majority of Pennsylvania-produced met coal is used domestically, and the majority stays in Pennsylvania, with…about three million tons of Pennsylvania-produced met coal goes to U.S. Steel,” Gleason said in an email.
Promoting met coal, while phasing out renewable energy credits
Met coal produced between 2026 and 2029 will now be eligible for the Advanced Manufacturing Production Tax Credit, (or 45X), created by the Inflation Reduction Act. In addition, the new law phases out tax credits for other critical minerals typically used in renewable energy by 2033. Under the Inflation Reduction Act, those tax credits were permanent. Lewis called it ironic that the tax credit will now be used for coal mining.
“This was supposed to reduce climate pollution. Instead, Trump is now going to use this rule to increase climate pollution by subsidizing coal use for steelmaking,” Lewis said.
Using coal to produce steel also has local pollution impacts. A recent report from Industrious Labs found the process adds $13 billion in public health costs in the U.S. and is responsible for hundreds of premature deaths around the country every year.
