A Short Guide To The Climate Impact Of Coal Exports

by KC Golden, via Getting a Grip

Coal export proponents like to argue that, climate-wise, it doesn’t matter:  Asia will burn the same amount of coal regardless of whether we ship it from the Northwest.  This argument is weak because it: a) defies basic economics – see here; b) ignores the x-factor:  economic “lock-in” to dangerous climate disruption – see here; and c) is morally dubious – see here.  So we know coal export is bad for the climate.  Check out Eric de Place’s social math for scale.

It’s true, however, that Powder River Basin isn’t the only coal available in Asia.  Estimating the net emission impact requires some elaborate economics (forthcoming). [i] But this graph is a rough, directional guide:

Let me explain.

It all comes down to the difference between the cost of producing and transporting Powder River Basin coal and the value of that coal in Asian markets.  That difference appears to be huge.

PRB coal isn’t dirt cheap.  It’s cheaper (than, say, top soil or gravel).  Most of it lies under public land, and the federal government basically gives it away.  Strip-mining is the very definition of quick and dirty – and, yes, super-cheap.  The mine-mouth cost of “producing” PRB coal is in the range of 10-15 bucks a ton.

Transporting it by rail and mega-ship to Asia is much more costly than snatching it from federal land, but there’s still plenty of margin.  Rail costs run about a penny a ton per mile, so that’s maybe another $20 a ton to get it to port.  Throw in say $15 for ocean shipping, tack on a value-added tax and port fees in China, and we’re looking at maybe $70 per ton delivered cost.

The benchmark thermal coal price in China in January was $115 per ton.  So PRB coal suppliers could significantly undercut the market, and still make a bundle.  This also explains why Asia is “just drooling” for this coal, and why, in turn, Big Coal is drooling to get it there.  Saliva speaks volumes.

The fact that they could sell coal so much cheaper also means that other suppliers would have to lower their prices to remain competitive.  And that would mean even greater increases in emissions, and more irreversible commitments to coal infrastructure.

So, both the potential for profits and the potential for net emission increases depend on the same factor – the amount by which the value of the coal in Asia exceeds the cost of getting it there.  In other words, the coal export business succeeds roughly in direct proportion to how much it disrupts the climate.

That means there is a reliable if not precise way to gauge how big the net emission impacts of coal export would be:  by observing how desperately the coal industry tries to make it happen. One more walk through the logic:

The harder the coal industry tries to mow down the opposition to coal export, the more we can infer that enormous profits are at stake.  And the size of the prospective profits is directly related to how competitive their coal is in Asia, which is directly related to how cheaply they can deliver it, which is directly related to how much would be burned.

Yup, how bad it would be for the climate is an indirect function of how much the coal industry wants it.  Judging by the money they are throwing at the early rounds of this battle, it’d be real bad.  And, they have warned, we ain’t seen nothin’ yet.

There is, of course, a corollary conclusion about how we should respond:

We will know that coal export would be okay from a climate perspective when they give up and stop trying to make it happen.

— KC Golden is Policy Director at Climate Solutions, a Northwest-based nonprofit. This piece was originally published at the Getting a Grip on Climate Solutions blog and was reprinted with permission.

[i] To calculate the net emission impact you have to assess how big the relevant markets are; how much cheaper this coal is than other available supplies in those markets; and what the “elasticity” of coal consumption is – that is, how much it changes in response to price.  We’re working on it; stay tuned.


13 Responses to A Short Guide To The Climate Impact Of Coal Exports

  1. Leif says:

    Profits from pollution? A stupid solution. Even with dilution. Lets hear it for the GREEN REVOLUTION. Perhaps even continue Evolution…

  2. BBHY says:

    “it doesn’t matter: Asia will burn the same amount of coal regardless of whether we ship it from the Northwest.”

    I hate those arguments. To me it always sounds like “People will always murder, so we might as well make murder legal”. Wrong, faulty logic alert!

  3. Leif says:

    Or: Ecocide is inevitable, lets keep it legal.

  4. SeaKat says:

    What I want to know is, since the rail capacity isn’t there, who will pay the costs of upgrading the rail capacity if any of these ports get approved?

  5. Mike Roddy says:

    Thanks for this, KC, good job. Unfortunately, there appears to be no legal remedy. Sooner or later a Republican governor will get elected in Oregon or Washington, and make sure that port expansion gets under way.

    What is our policy climate solution here? Or, more to the point, how can the people stop this madness?

  6. Leif says:

    This just came up on my FB page.

    My reply: “Well… I supposed it would depended on if the Aliens shared the money with the “Right” people. You think?”

  7. DRT says:

    I suppose we could buy up the coal leases on public lands and hand them off to an org. like the Nature Conservancy. I have no clue how to do that or what is the $ amount involved.

  8. TedN5 says:

    The evidence for catastrophic climate change in the coming decades was bad enough without the push for massive increases in coal exports, more tar sands oil from Canada, and talk of developing tar sands in Utah and oil shale in NW Colorado and neighboring states. The people behind these proposals place no value whatever on the future of their children and grand children!

  9. Leif says:

    How about what the Fossil Barons paid for the “Mineral Rights” in the first place? Why more?

  10. hebintn says:

    The obvious downside of burning coal and generating more greenhouse gas need not even be discussed. The economics are obvious. What people don’t seem to get is the environmental and health impact of surface coal mining, e.g. mountaintop removal mining. Our Appalachian mountains are unique, geologically and biologically in the world. We have been systematically destroying them for many years in the name of cheap. The environment near mountaintop mines is such that there are elevated rates of cancer and other diseases, and a woman is twice as likely to have a baby with birth defects than a woman who smokes. All the economic arguments are meaningless in view of all the other problems associated with coal. But as was mentioned, our GOPher party makes their living underground and cares nothing about those of us who live and love the mountains.

  11. Frank Zaski says:

    In 2012 prices, shipping coal to China is probably a lot more than indicated above.
    There are sites that say it costs 2 to 3 cents per ton per mile to ship by rail. The big increase is caused by escalating diesel prices. Bunker fuel used in ships is now about $760 per ton, or $2.60 per gallon. It too is dependent on the price of oil.
    Also, ships are far more polluting than land transportation. Sea shipping is responsible for 18-30% of the world’s NOx, 9% of SOx and 4% of all climate change emissions. But, Europe is cracking down on this, so should all countries.

  12. Ray Duray says:

    Asia Times has an article about Mongolian coal being shipped presently to China:

    According to Asia Times and this Mongolian publication: the price of the Mongolian metallurgical coal is US$ 70 per ton.

    So, the Mongolians are already undercutting the Australians on price, but they cannot provide much quantity at this time.

  13. Dave Bradley says:

    This coal needs to be priced higher for it not to be used. This is easy. The Federal Govt needs to add on at least $10/ton royalties, and maybe more. And they can also charge a tariff on materials EXPORTED. Make more money for the Federal Govt, to the point where less coal gets exported.

    Yes, China will get their coal from eleswhere, but that too will cost more. The price of coal in China needs to be raised, and we need to do our part to raise it.