Foreign Policy Blogs

U.S. Coal Exports and Carbon Dioxide Emissions

Source: Kiser – Morguefile

U.S. Department of Energy (DoE) data – analyzed by AP – show that coal exports topped 107 million tons of fuel worth almost $16 billion in 2011 due to stronger overseas demand especially from Asia, Bloomberg reported recently. This is the highest level in 21 years and more than double the export volume from 2006. Coal exports to South Korea increased by 81 percent in 2011 to more than 10 million tons, to India by 65 percent to 4.5 million tons and to Japan by a stunning 119 percent to almost 7 million tons. Japan’s case is an outlier given that country had to seek alternatives to a 30 percent shortfall in nuclear power generation in a post-Fukushima world. U.S. exports have also risen to Brazil, China and European nations seeking high-quality coal for their respective steelmaking industry. While the DoE expects exports to drop from 107 million tons to about 99 million tons a year through 2014, private companies predict substantially higher export capacity in the future. This sounds like a monetary blessing but might turn out to be a global environmental curse.

Given that globally emerging countries are interested in raising living standards of their growing populations, the demand for electricity and consequently for natural resources in general will only rise because economic development and rapid urbanization require more and more of those resources. We will witness two divergent trajectories in this respect: Whereas the West – pushed by environmentalists to reduce carbon dioxide emissions and domestic regulations acting as a disincentive to build coal-fired plants domestically in democratic societies – will try to get more and more off its previous coal addiction (see in the U.S. the newest EPA coal regulation applicable for the future), the fast growing emerging countries in Asia and especially China will increase their demand for coal to keep on growing. China is trying to secure and buy coal assets around the world. Just recently, it has been reported that the Chinese multinational aluminum company Aluminum Corporation of China (Chinalco) acquired a share in a Mongolian coal producer. China’s authoritarian state capitalist system also makes sure that carbon dioxide emissions are not an environmental concern as much as they should be. The Communist party’s argument often is that China has to catch up to the West and the U.S. and therefore cannot afford such a luxury at the current stage of economic development.

As for the U.S. coal currently has to compete with extremely cheap natural gas (10 year lows and ample supplies in shale formations) and costly new rules for power plants constructed in the future. Coal’s share of the U.S. domestic power supply has dipped by more than 20 percent in the past several years according to the Bloomberg article. However, note that these low natural gas prices may be only temporary once the U.S. starts tapping its natural gas reservoirs in full for alternative use and the LNG export market. Mind you, the price is not fixed and may currently also be a result of the mild winter. Therefore, using coal might still end up being cheaper in the future. Moreover, putting the necessary infrastructure into place in order to expand use of natural gas will cost billions of dollars and will require time.

Thus, a reduction in U.S. domestic pollution may in the short term be canceled out if this fossil fuel is burned for power generation in Asia instead. China is currently operating 14 nuclear reactors on the mainland and some 26 reactors are under construction and many more are likely to be so in 2012. China aims at least to quadruple its nuclear capacity from that operating and under construction by 2020 according to the World Nuclear Association.

In sum, even if U.S. domestic demand for coal will further decline from here, the overseas demand is here to stay for at least the next decade. So, the reduction in U.S. coal use is only a blessing in disguise. A relative improvement in U.S. carbon dioxide emissions means absolutely little in a globalized world. Still, it is a start.