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Over the past two decades Democratic and Republican administrations have taken steps to reduce U.S. carbon-dioxide emissions by reducing use of fossil fuels. Despite growing public attention to the climate consequences of fossil fuel extraction, U.S. climate policy so far has not extended to the government’s role as a major source of fossil fuels. Kenneth Gillingham and James Stock propose to incorporate climate considerations into federal coal leasing by placing a royalty adder on federal coal that is linked to the climate damages from its combustion. A royalty adder set to 20 percent of the social cost of carbon would reduce total power sector emissions, raise the price of federal coal to align it with coal mined on private land, increase coal mining employment in Appalachia and the Midwest, and provide additional government revenues to help coal communities.