Coal’s Dismal Future

With or without Trump’s policies, those Appalachian coal jobs aren’t coming back.

Earlier in August, the governor of West Virginia asked Trump for a billion-dollar bailout of the Eastern coal industry. Under his plan, the federal government would pay power companies $15 per ton to use Appalachian coal. That’s a sign of the industry’s desperate economic plight. In 2016, global coal use had its biggest drop in history. The U.S. had the largest drop of any country. The decline in U.S. production seems likely to continue, despite a minor blip recently. The U.S. Energy Information Agency (EIA) projects continued declines in coal use between now and 2040. In its “reference case,”

Coal consumption decreases as coal loses market share to natural gas and renewable generation in the electric power sector.

On a percentage basis, renewable energy grows the fastest because capital costs fall with increased penetration and because current state and federal policies encourage its use.

The reference case assumes continuation of current technological trends and of existing regulations but does not take into account proposed regulations or future regulatory changes.

Trump and Pruitt might respond that eliminating current regulations might change this result. But this doesn’t account for projected decreases in coal use after 2025 when current policies will no longer be producing further decreases. It’s also worth noting that the EIA’s projections for solar have consistently fallen short of reality.

A careful analysis in a recent Columbia University study shows that Trump’s policies, if fully implemented, would at best lead to a small increase in coal use, back to 2014 levels by 2030. On the other hand, with falling prices for natural gas and renewables, coal use could end up as low it would have been with Obama’s policies.

In several ways, this study gives Trump the benefit of the doubt. It assumes that Trump’s policies will be fully implemented, with no defeats in court. It also assumes that his policies will remain in effect after 2020, when his first term ends, and that in any event the risk of a large reversion to Obama’s policies has no impact on utility company investments.

Of course, there are policies that would help revive coal. For instance, a ban on fracking would push up natural gas prices, and this effect could be amplified with a tax on conventional gas. But that’s the opposite of Trump’s goal of increasing oil and gas production.

The study also considers trends in the international coal market. There’s been a small uptick in Chinese imports, due to problems with Chinese production. The IEA projects a small decline in Chinese coal use between now and 2030, so China seems unlikely to bail out the U.S. coal industry. India might have a small increase in coal use, but not enough to offset declines in China. All this assumes that India and China don’t make an unexpectedly large turn toward renewables. There are some indications that they are in fact moving away from coal faster than expected, though it remains to be seen if those indications will prove out.

The bottom line is that Trump’s policies might be able to prevent further decline in the coal industry, but even so, nothing we currently know suggests a substantial revival for the industry. In the very best case scenario, production would be less than a third of what it was in 1980.

And any revival that did occur would be more likely to help Western producers than Appalachia, because costs are lower there and the coal is less polluting. As I noted in a previous post, an  issue brief by Alan Krupnick at Resources for the Future (RFF) lays out the stark economics of the situation:

Western coal is far cheaper because it is strip-mined (rather than deep-mined), driving the underlying labor productivity differences (29.3 short tons per worker-hour in Wyoming’s Powder River Basin versus 1.6 short-tons per tons per worker-hour in southern Appalachia.). And western coal is more desirable to utilities because it has a much lower sulfur content (if somewhat lower energy content) than eastern coal, so helps meet standards for sulfur dioxide emissions under the Clean Air Act.

According to Krupnick, the cost disadvantage of Eastern coal is so great that even doubling the federal royalty on Western coal would hardly help.  That would lead to a 15% increase in coal production in Northern Appalachia and a 7% increase in Central Appalachia.

In short, Trump’s policies offer no recipe for reviving eastern coal country. But they would increase U.S. air pollution and carbon emissions. All pain and little or no gain, in other words.

 

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Reader Comments

6 Replies to “Coal’s Dismal Future”

  1. And, due to the basic physics of steam vs combined cycle plants, a Btu of natural gas produces substantially more electricity than a Btu of coal, totally aside from the hassle of handling rock vs. gas in a power plant.

  2. Germany’s Angela Merkel Quietly Retreats From Paris Climate Agreement:

    “…..Angela Merkel is essentially the de-facto global head of modern political liberalism. The central tenet, almost religious-based in its importance, is the lunacy within “climate change”. However, as most reasonable people have concluded, the ‘climate discussions’ are more about controlled global economics than any actual concerns about planetary climatology. Bottom line, it’s the economics that really matter beyond all else………”

    https://theconservativetreehouse.com/2017/08/20/the-bloom-is-off-the-ruse-germanys-angela-merkel-quietly-retreating-from-paris-climate-treaty/

    1. Angela Merkel said:
      “……We need diesel if we are to achieve our climate protection goals,…….she warned against a swift abandonment of diesel cars after a series of emissions scandals, saying the fuel is still needed if climate change targets are to be met…….”

      Dear Ms Merkel,
      Apparently diesel fuel mitigates climate change in Germany. We would like to know whether German mitigation technology might become viable in California? Would German automotive engineers figure out how to mitigate using gasoline, that would be a monumental break through. Germany leads the EU in climate clamor. Go Germany, say goodbye to Paris.

  3. Dan, I have studied solutions to humanity’s problems documented in John Brockman’s 2007 Edge Annual Question “WHAT ARE YOU OPTIMISTIC ABOUT?” by 160 “high-powered scientific thinkers” for a decade

    In spite of all the world class wisdom in this book, Trump’s presidency has now proven that we have made no progress to protect the future of the human race even though we have produced “ever deepening knowledge and ever more efficient and powerful tools and techniques“ since the book was published in 2007.

    https://www.edge.org/annual-question/what-are-you-optimistic-about

    Do you folks at Legal Planet have better solutions we can implement before time runs out?

    1. Anthony asked:
      “….Do you folks at Legal Planet have better solutions we can implement before time runs out?….”

      Dear Anthony,
      It is always good to hear from you. In our hearts and minds, we all know that it is too late to save the world from climate change or from any other future calamity.

      King Solomon offers this sage advice in the Book of Ecclesiastes “Fear God and keep His commandments” that’s the best solution to all of life’s troubles.
      Have a good day

    2. There are a lot of solutions both for reducing fossil energy use (via renewable energy and via energy saving), and carbon sequestration.

      The number one game changer is fusion, which seems much closer than ever. Though fission is controversial, newer designs and thorium cycle systems may prove appropriate.

      On the sequestration side, only considering ocean biological systems, kelp forest restoration could be effective, littoral artificial aeration would help and minimize methane as well, and OTEC could provide both energy and sequestration.

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About Dan

Dan Farber

Dan Farber has written and taught on environmental and constitutional law as well as about contracts, jurisprudence and legislation. Currently at Berkeley Law, he has al…

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