Europe is burning more American coal

Michael Giberson

Natural gas production is booming in the United States. The resulting low natural gas prices are helping the fuel displace other energy sources, most particularly the use of coal to produce electric power. As U.S. demand for coal falls, so has its price and as a result international coal buyers are increasingly turning to U.S. suppliers. One big buyer: Europe.

Ironies abound in this Washington Post report on growing European use of coal. The EU has elaborate and costly greenhouse gas regulations while the U.S. has failed to implement any systematic federal greenhouse gas policies. European nations like Germany, Spain, and Denmark are frequently cited as models for their support of renewable energy. And, with these policies in place, greenhouse gas emissions are falling in the United States and Europe is burning more coal. Apparently good intentions are not enough. The Wall Street Journal had a similar report yesterday: “U.S. Coal Finds Warm Embrace Overseas.”

One more point: All that “good news” about reductions in U.S. greenhouse gas emissions is mitigated a bit by tracing through the economic logic. We’ve displaced some coal consumption by increased gas consumption, but much of that coal is simply being burned in Europe or China or elsewhere. U.S. coal production has been relatively flat for two decades, but U.S. coal exports have doubled since the 2006. (See EIA data here.) So we’re cutting emissions, but there will be essentially no climate change pay-off from the cuts. This same consequence would have arisen had the U.S. shifted from coal to natural gas because of carbon taxes or an effective U.S. cap-and-trade scheme (except in that scenario we pay more for energy rather than less. Technological improvements rule!).

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5 thoughts on “Europe is burning more American coal

  1. Michael,

    My sense is that the picture is a bit more complicated than you present – electricity sector Coal consumption in the US is off about 100 MST since 2008-9. Total exports are up only about 30 to 50 MST since that time. But exports are currently constrained by export terminal capacity – and there are real questions about how fast and if this capacity will expand – there is currently one facility in BC moving forward with expansion and several proposed but not approved in the US. So net emissions are in fact down from US coal over the past several years, although not by as much as one might have thought from just looking at the electricity data.

    Finally, the reasons that Europe is burning more coal are complex. First of all, it has to do with Germany’s post-Fukushima decisions about older Nuclear units – alas Germany can’t meet all of its baseload with French nuclear. Second, because of the recession, the cost ($ per ton carbon) of burning coal in Europe is very low – so it makes sense that generators are willing to burn more of it despite the cap and trade over there. Some economists have pointed to this countercyclical dynamic in C&T programs as a real benefit relative to a carbon tax alternative. In Europe, its generating demands to reduce the supply of allowances in the next trading period.

    In any case, overall, the reasons for coal exports and increased coal fired generation in the EU are not as simple as innovation works, regulation doesn’t.

    Best,
    MW

    http://www.eia.gov/totalenergy/data/annual/showtext.cfm?t=ptb0703

    http://www.eia.gov/totalenergy/data/annual/showtext.cfm?t=ptb0705

  2. That Washington Post article represents a classic failure to understand both the “that which is seen and that which is not seen” as Bastiat put it. Because of the carbon market in Europe, total European carbon emissions are fixed. Increased coal use consumes CO2 allowances that would have otherwise been used for the burning of other fossil fuels.

  3. This is why carbon taxes should be applied at the mine mouth or the well-head not at the point of consumption. Once the coal is mined, it will be burned. A carbon tax should discourage mining the stuff, not just burning it.

  4. Reduction of carbon emissions would require massive investments in low/no carbon emissions facilities and equipment. A carbon tax would merely add costs on top of that investment requirement, with no predictable reduction in carbon emissions.

    China already burns nearly half of all of the coal consumed globally each year; and, China’s consumption is growing at ~9% per year..A coal extraction tax in one of China’s supplier nations would be more likely to shift China’s purchases to other suppliers, rather than cause a shift to other sources.

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