Coal Isn’t Dead Yet – by Jason Bordoff (Wall Street Journal – September 15, 2015)

http://blogs.wsj.com/

According to recent news reports, coal is a dying fuel. A New York Times headline from early August, “King Coal, Long Besieged, Is Deposed by the Market,” reflects the prevailing consensus around coal’s demise.

As the U.N. climate change talks approach in December, the popular narrative around the death of coal—by far the most carbon-intensive fuel—makes the prospect of reaching an ambitious climate agreement seem that much easier. But this understates the severity of the challenge. Real progress on a global scale will require acknowledging that the world’s coal consumption will remain a growing concern for decades.

It certainly is true that coal firms in the U.S. are in a tough spot. The Dow Jones U.S. Coal Index, which captures the largest listed coal companies, has fallen 88% in the last five years. By comparison, the S&P 500 is up more than 70% over the same period.

Alpha Natural Resources, once the second-largest coal producer in America, filed for bankruptcy in August; six other smaller producers did the same over the past year. Domestic coal prices have fallen by more than 40% since 2011. Coal’s share in U.S. power generation is down from 50% in 2005 to 36% today, and the Clean Power Plan is projected to push it below 30% by 2030.

In Europe, which has a cap-and-trade system and has been aggressively encouraging renewable energy, coal’s share of power generation declined from 29% to 27% between 2005 and 2013. Total coal use is down 15% since 2005, as electricity use has declined. Looking forward, European environmental rules are expected to reduce coal use further by 26% by 2025.

Globally, however, any reports of coal’s death are premature. China, which consumes half the world’s coal, is key to the fuel’s outlook. Until very recently, coal use in China had been projected to increase continuously through at least 2040. That outlook is much bleaker today. But even if Chinese coal use may be plateauing, as some data sources suggest, it will face a long sunset, not a sharp decline.

China is taking significant steps to reduce its choking air pollution, and in small industrial plants and residential boilers coal is being phased out. But for electricity and steel production, which account for four-fifths of China’s coal use, cleaning up the air predominantly means installing technology on existing coal plants rather than permanently closing a sizable portion of its coal power plants—and that technology does nothing to combat carbon pollution.

For the rest of this column, click here: http://blogs.wsj.com/experts/2015/09/15/coal-isnt-dead-yet/

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