With US natural gas production growth and subsequent natural gas price declines coal has been backed out of the power generation fuel mix to some extent. As a result, US coal producers are exporting greater volumes to European and Asian buyers, which is a trend that alarms many in the environmental community who fear negative climate impacts associated with burning the carbon rich fuel. However, Stanford University economics professor Frank Wolak argues that exporting more US coal to Asia could actually reduce global greenhouse gas emissions.
The idea is that increased demand resulting from a robust export business would cause domestic coal prices to increase, which in turn would further strengthen natural gas price competiveness causing power generators to burn less coal. While US coal will find buyers in the already well-supplied Asian market, it is not likely to increase overall Asian coal consumption on a net basis.
“Although there is plenty of coal available in Indonesia, Australia, and South Africa to meet China’s and the rest of Asia’s imported coal needs, increasing western U.S. port capacity can allow a significant amount of Powder River Basin coal to be sold in Asia. The increase in U.S. coal demand caused by these exports will increase domestic coal prices and further increase the relative price of producing electricity from coal relative to natural gas in the United States. Consequently, increased coal exports to Asia will yield no net change in greenhouse gas emissions from China and other Asian countries, but a reduction in U.S. greenhouse gas emissions because of the shift from coal to natural gas-fired generation brought about by the higher U.S. coal prices caused by the substantially higher coal exports to Asia.” – Professor Frank Wolak in an interview with the Property and Environment Research Center
|Breaking Energy provides access to news, analysis, thought leadership, reference materials and discussions about the day’s most important energy market trends. Breaking Energy participants stay ahead of breaking news, participate in high-profile events and enjoy access to the central hub of the industry community as it transforms in response to fast-moving changes in energy politics and regulation, deals with financial challenges and leads technological advances.|