The mixed fortunes of a fuel: Coal in the rich world (The Economist – January 5, 2013)

Why is the world’s most harmful fossil fuel being burned less in America and more in Europe? The first of two stories looks at America’s cheap gas and new rules

WASHINGTON, DC – IN A high-tech world, dirty black lumps of coal might seem like an anachronism. Yet coal is far from a thing of the past. However whizzy your iPad, your wall-mounted television or your electric car, the chances are that it is powered by the stuff. Coal-fired power stations provide two-fifths of the world’s electricity, and there are ever more of them. In the doubling of the world’s electricity production over the past decade, two-thirds of the increase came from coal. At these rates, coal will vie with oil as the world’s largest source of primary energy within five years. As recently as 2001, it was not much more than half as important as oil (see chart).

The main factor has been the unslakable thirst for energy in China, which in 2011 overtook America as the world’s biggest electricity producer. In 2001, according to the International Energy Agency, a club of rich nations, Chinese coal demand was about 600m tonnes of oil equivalent (25 exajoules). By 2011 China’s coal demand had tripled—a rise from two-thirds of the energy America gets from oil to twice that amount. China’s domestic coal industry produces more primary energy than Middle Eastern oil does.

Other developing economies are just as keen on coal, if not yet on such a grand scale. In India, producing 650 terawatt hours of electricity in 2010 took 311m tonnes of oil equivalent, and the power sector’s coal demand is growing at around 6% a year. The IEA reckons India could surpass America as the world’s second-largest coal consumer by 2017.

But if America no longer dominates the business as it once did, what is happening to the industry there is still able to trigger changes far away. And at the moment coal is falling from favour in America.

King no more

In developing economies coal’s advantages—being cheap and widely available—are deemed to outweigh the damage it inflicts both on people near the places where it is burned (burning it gives off particles that harm people’s health) and on the planet as a whole (burning coal produces carbon dioxide, the most important long-lived greenhouse gas). In rich countries you might expect the cost-benefit balance to tip the other way, and coal use to be dropping. But things are not quite that simple. In America coal is indeed being burned less and less—but not principally thanks to climate policy, of which America has relatively little. Meanwhile in Europe, which likes to see itself as a world leader on climate, they are using more and more of the stuff (see article).

America’s coal business, like the rest of the country’s energy industry, has been upended by the advent of shale gas, now available in unforeseen quantities at unforeseen prices. In April 2012 the price fell below $2 per million British thermal units, or Btus ($7 per megawatt hour). This has made gas increasingly attractive to power companies, which have been switching away from coal in increasing numbers.

At its peak, in 1988, coal provided 60% of America’s electricity. Even in 2010, when the shale-gas boom was well under way, it still accounted for 42%. By the middle of 2012, though, gas and coal were roughly neck-and-neck, each with around a third of power generation.

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