NCPA - National Center for Policy Analysis

What Does the Future Look Like for American Coal?

January 30, 2015

As the debate on global warming heats up, renewable energy has received increased attention.  As of 2012, 40 percent of the United States' electricity came from coal. The rest came from natural gas (26 percent), nuclear power (20 percent) and hydropower, renewable energy and other sources (14 percent).

While coal remains America's most used energy resource, it faces mounting challenges, writes Jacopo Zenti, research fellow at the National Center for Policy Analysis. Natural gas is becoming increasingly popular compared to coal due to a decrease in natural gas prices spurred by hydraulic fracturing and horizontal drilling technologies.  Worse, coal is the target of many Environmental Protection Agency regulations which seek to limit power plant emissions.

However, the decreased domestic demand for coal does not necessarily spell doom for coal producers.  In 2012, the United States produced 1 billion short tons of coal and exported 125 million short tons. More could be exported:

  • India, Japan and China all have increasing demand for coal, and China relies on coal for more than 70 percent of its energy production. 
  • Demand is also high in Europe -- Germany decided in 2011 to replace its nuclear energy production with coal by 2022, which led to a doubling of American coal exports to Germany between 2010 and 2011. 
  • The United Kingdom and the Netherlands were the two largest importers of American coal in 2012, and American coal exports to Britain were 73 percent higher in the first three quarters of 2012 than in 2011.

Unfortunately, Zenti says projects that would aid in the exportation of coal have been delayed by environmental groups who want the global environmental impact of coal exports to be taken into account before authorizing new, local projects.  This has led to extensive delays and the cancellation of several projects.

While one might think increasing coal exports hurts the environment, Zenti says it's not the environmental detriment that many would expect -- restricting American coal exports to China, for example, will do nothing to reduce coal emissions, because China will consume more of its own coal (which comes from less regulated sources and is arguably dirtier than American coal) or import it from other countries. In short, other countries will not stop burning coal if America restricts its exports -- they will simply stop burning American coal.

Source: Jacopo Zenti, "The Future of the American Coal Industry," National Center for Policy Analysis, January 30, 2015.

 

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