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Overseas Demand Breathes New Life into U.S. Coal

By Kieran Cooke, Climate News Network

The good news is that U.S. greenhouse gas (GHG) emissions are continuing to decline. “Over the last four years, our emissions of the dangerous carbon pollution that threatens our planet have actually fallen,” said President Obama in his State of the Union address.

The bad news is the U.S. is exporting its polluting gases, particularly in the form of coal, like never before. Figures released in March by the official U.S. Energy Information Administration (EIA) show U.S. coal exports reached a record of more than 115 million tons in 2012, more than double the 2009 figure.

U.S. coal is big business – and getting bigger, abroad if not at home.
Credit: U.S. National Archives and Records Administration

In a report examining the legal implications of increased U.S. coal exports, the Columbia Law School notes that GHG emissions are not just a national issue.

“Because the impacts of CO2 emissions are global in nature, it makes no difference from a climate change perspective whether coal mined in Wyoming is consumed in Chicago or Shanghai,” it says.

Coal is far more polluting in terms of GHGs than either oil or gas, emitting higher levels of CO2 and also other toxic substances such as sulphur dioxide, nitrogen oxide and mercury.

The drop in U.S. GHG emissions – according to the EIA, total U.S. carbon emissions have now fallen by more than 8 percent since peaking in 2007 – is in part due to the economic slowdown, but more so to a move from coal-fired electricity generation to less carbon-intensive natural gas, particularly gas produced from hydraulic fracturing, or “fracking.”

In 2005 coal accounted for half of all electricity generation in the U.S.: now it generates 37 percent of the country’s electricity, with forecasts that figure will drop to around 20 percent by 2030.

Attractive to importers

The move to gas has been spurred both by tougher regulations on pollution and, with gas production booming, an overall drop in energy prices. There has also been strong growth in renewable energies, particularly in solar power.

U.S. coal giants such as Arch CoalAlpha Natural Resources and Peabody Energy have not let the decline in domestic demand faze them. Instead they’ve gone wholesale into export markets, particularly in Europe, with coal-exporting terminals on the U.S. east coast operating at maximum capacity.

U.S. coal giants have not let the decline in domestic demand faze them. Instead they’ve gone wholesale into export markets, particularly in Europe, with coal-exporting terminals on the U.S. east coast operating at maximum capacity.
Credit: flickr/arbyreed

High gas prices within the EU make U.S. coal extremely competitive as an energy source. Bad weather has contributed to an uptake in demand.

The collapse in price on the EU’s European Trading Scheme carbon market and a vast oversupply of so-called pollution permits is another reason for the surge in U.S. coal imports. Worries about energy security and an over-dependence on gas supplies from Russia and the countries of central Asia are additional factors driving the trade.

EIA figures show Europe is now by far the biggest customer for U.S. coal, importing more than all other markets combined. U.S. exports to the UK jumped by about 70 percent in 2012.

Exports to Germany, which phased out nuclear power generation in response to the Fukushima accident in Japan, have also increased.

Europe’s energy companies are taking advantage of relatively cheap coal imports while they can. EU regulations, particularly the Large Combustion Plants Directive, stipulate that older coal plants which do not meet stringent targets on lower emissions levels have to be phased out.

All eyes on Asia

While tighter regulations on pollution could result in a decline in U.S. coal exports to Europe in the years ahead, its unlikely producers in Pennsylvania or Montana will be cutting back on their activities. Asia, by far the biggest coal-consuming region, where demand continues to grow, is the next target.

At present the U.S. is the world’s fourth largest exporter of coal – after Australia, Indonesia and Russia. U.S. firms are now setting their sights on the big markets in Asia, particularly China and India.
Credit: flickr/glennia

At present the U.S. is the world’s fourth largest exporter of coal – after Australia, Indonesia and Russia. U.S. firms are now setting their sights on the big markets in Asia, particularly China and India.

Coal lobbyists are pushing for new coal terminals to be built on the U.S. west coast to provide easier access to Asia. Exports to China – the world’s biggest coal producer and consumer – have been growing rapidly. Last year one U.S. coal company signed a $7 billion export agreement with an Indian conglomerate. Other deals are in the pipeline.

A recent report from the UK’s Tyndall Centre for Climate Change Research looked at the growth of the shale gas industry in the U.S. and questioned whether it had contributed to a global drop in CO2 emissions.

The answer was no. Tyndall’s calculations suggest that more than half of the emissions avoided in the U.S. power sector – through the switch from coal to gas – may have been exported as coal.

“Without a meaningful cap on global carbon emissions, the exploitation of shale gas is likely to increase total emissions,” said the report. “For this not to be the case, consumption of displaced fuels must be reduced globally and remain suppressed indefinitely. In effect displaced coal must stay in the ground.”

Kieran Cooke is co-editor of Climate News Network. Climate News Network is a news service led by four veteran British environmental reporters and broadcasters. It delivers news and commentary about climate change for free to media outlets worldwide.

Comments

By Colin (Saint Paul, MN 55104)
on April 4th, 2013

Thank you for pointing out that emissions are a global concern unconstrained by borders. Whether in fact it may be claimed that US emissions are falling, or simply being emitted elsewhere, is an important facet of the discussion in the broad energy transition underway.

I don’t see mentioned the impact of the 2008 recession in your considerations. In the 6th paragraph, you posit that the preponderance of the drop in US CO2 emission is due to utility substitution of NG for coal, and undoubtedly this is a factor. You may be familiar with this study: http://rhg.com/notes/coal-claws-back ; suffice to say there are many variables and it’s difficult to suss out definitively, but they find the greatest share in CO2 reduction (~55%) to be due the 2008 downturn and resulting fall in demand.

As with the fall in the US of VMT per capita, it seems that demand destruction for electricity has played a considerable part in the reduction of emissions in this country. Which is to say: it may well change.

Reply to this comment

By Edward Boulter (Tempe, AZ 85282)
on July 8th, 2013

Thank-you for this excellent reporting. When the CEO of Peabody says that India and China is the future, I think this is mainly because Peabody mines coal in Australia and its US competitors don’t combined with the fact that India & China have no restrictions on CO2 output. As it has done with iron and copper, Australia (BHP Billiton & Peabody are the principal players) will provide the bulk of coal to the high growth economies in South Asia. See http://www.peabodyenergy.com/flash/#/australia/
“Peabody Energy is actively pursuing growth plans in Australia. In Australia, Peabody has substantial market diversity, domestic and seaborne customers and the capacity to access multiple coal ports and railroads.”
or BHP-Billiton: http://www.bhpbilliton.com/home/businesses/coal/Pages/default.aspx
THX

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