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How Realistic Is A U.S. Coal Recovery?


Ah, Canada. Home of Trudeau, seven-month ski seasons, Neil Young, Hershey's Chocolate you can actually enjoy (it has its own recipe) and my birthplace – and now one of the latest countries to announce the imminent phase-out of all coal-fired power plants.

The idea of getting rid of coal is quite the mode du jour since the Paris Agreement became effective earlier in November. Britain, France, Germany, the Netherlands, Austria and Finland are all planning accelerated moves to become greener. The Canadian Environment Minster Kathleen McKenna said, “Taking traditional coal power out of our energy mix and replacing it with cleaner technologies will significantly reduce our greenhouse gas emissions, improve the health of Canadians, and benefit generations for years to come.”

It's so trendy, there's almost been a race between these players to see who can sweep it away first. The UK came out first with Energy Secretary Greg Clark declaring the last coal power station will be forced to close in 2025 and said this was “a clear signal that Britain is one of the best places to invest in clean, flexible energy”. Of course, in recent times it seems UK ministers love nothing more than shooting themselves in the foot, and a delayed consultation paper was subsequently published that showed even without government intervention the last coal power station would likely shut up shop in 2022. So that led to an appearance at the UN Climate Change Conference two weeks ago by President Hollande who vowed to beat the UK by eradicating it by 2023. Demand in China has even stalled – by some estimates it dropped by 3 percent in 2015.

I know what you're thinking. Didn't someone just promise to save their country's coal industry? It is thought to be the reason why Pennsylvania (along with every other coal state) voted for President-Elect Trump, overturning six-decades of support for the Democrats. Hand in hand with that was a repeated promise during the campaign to “cancel” the international deal on climate change, frustrating many of the signatories including President Hollande who amused himself at the UN event by going on to have a pop at Trump, by praising the outgoing president. “The role played by Barack Obama,” he told the audience, “was crucial in achieving the Paris Agreement.” Related: Why The Oil Industry Shouldn’t Fear Peak Demand

Trump appears to be becoming more nuanced on his future plans regarding energy. He told The New York Times that he has “an open mind” on climate change and “We're going to look very carefully (at the Paris Agreement). It's one issue that interesting because there are few things where there's more division (politically) than climate change.”

What it means though is uncertain. “He may have started to understand that as opposed to what some of his denialist advisers are telling him, that this is not 'all gain and no pain' if he pulls the US out,” said the Union of concerned Scientists' Alden Meyer. “It's not clear whether those are just some words in response to a question or whether it really does mean he's going to do a serious relook at this whole issue.” Tom Friedman, the columnist who did the interview said afterwards, “He went out of his way to make clear he was rethinking them. How far? I don't know. But stay tuned, especially on climate.”

Promising coal workers their jobs would be saved under his leadership was an easy way to secure their votes. However, delivering on this might not be as simple as it might seem. As previously mentioned by Precise, a significant factor in the decline of the US coal industry is cheap shale gas. Since 2010 coal use in the electronic power sector declined by 239m tonnes due to the increased use of gas. Coal industry supporters prefer to believe that it is the U.S. Environmental Protection Agency which has been behind the collapse of coal.

Forbes.com points out there are ways of supporting a resurgence. “Restoring demand can be done in a number of ways, including by encouraging a surge in exports and the industrial use of coal, primarily for steel and concrete making the former will require the talents of a master deal maker (we will soon have one in the White House), while the latter could be done with a massive infrastructure project (proposed by the deal maker soon to be in the White House).” Related: The SEC Wants To Know How $3 Billion Disappeared At This Coal Mine

Trump's USA is really the only developed country looking to increase coal use (even though the EIA expects gas will provide 34 percent of the electricity generated in the US compared with coal's 30 percent in 2016). There is a potential split between developed and developing countries regarding coal use. The IEA estimates that global coal demand will in fact reach 2014 levels by 2020, largely down to Indian and south-east Asian growth. As The Guardian reports, “This could be enough to more than offset declining demand in Europe, north America and China.” The World Coal Association's Chief Executive Benjamin Sporton sees no reason for concern, asserting that “Developed countries will continue to use coal for decades to come and developing countries will increase (their use). ...Coal is a reliable fuel.”

But how much of a place will it have in a world which is changing? It takes seven years to construct a coal unit, while a natural gas plant takes only three. As American Electric Power CEO Nick Atkins told USA Today, “If Trump were able to do that (rescind the Clean Power plan), I don't know really how much impact it would have because we're moving ahead and re-balancing our portfolio... It's going to be very difficult for new coal-fired generation to get developed.”

By Precise Consultants

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