By Nate Aden
In 2012 the U.S. exported 114 million metric tons of coal (126 million short tons) — 12 percent more than the previous high set in 1981. The rapid rise of U.S. coal exports exceeded the Department of Energy’s forecast, published in the 2012 Annual Energy Outlook, by 30 percent.
Coal export growth is driven by historically low domestic natural gas prices, diminishing U.S. coal demand, and growing use globally over other primary energy sources. On a global level, the International Energy Agency forecasts that coal will rival oil as the world’s top primary energy source by 2017. Analysis by the World Resources Institute found that more than 1,100 coal-fired power plants are currently being proposed for development globally. Given that the U.S. has more proven coal reserves than any other country, there is large potential for continued export growth.
Where is U.S. coal going?
In 2012, the largest destination for U.S. coal exports was the Netherlands, followed by the United Kingdom. The European Union accounted for 45 percent of U.S. 2012 coal exports by volume. China was the third largest destination, and Asia accounted for 26 percent of 2012 American coal exports.
Since 2000, annual U.S. coal exports to Canada have dropped by more than 10 million metric tons, while exports to the Netherlands, the U.K., China, and South Korea have at least tripled. Rising European coal imports are driven largely by natural gas price disparities and low carbon prices in the E.U. emissions trading system (ETS). China switched from net international coal exports to imports in 2009, and now serves as the world’s largest coal-importing country. In 2012 China imported 235 million metric tons of coal — more than double total U.S. 2012 coal exports. Long-term demand drivers suggest continued growth of Chinese coal imports. In 2012, the U.S. was the 8th largest source of Chinese coal imports behind Indonesia, Australia, Mongolia, Russia, Vietnam, South Africa, and North Korea.
What’s the impact of U.S. coal exports?
Coal use creates a range of environmental, economic, and political impacts. While the U.S. has introduced policies to limit the health impacts of coal-fired electricity generation, local populations in other countries absorb more of the total costs of coal use. Until commercial-scale carbon capture and sequestration technology is available, coal will be the most greenhouse-gas-intensive primary energy source.
Burning the coal exported by the U.S. in 2012 generated 292 million metric tons of carbon dioxide. That’s equivalent to the average annual greenhouse gas emissions from 55 million passenger vehicles, or to 75 coal-fired power plants — and in excess of the 2009 greenhouse gas emissions of the state of New York.
The marginal impact of U.S. coal exports on global greenhouse gas emissions largely depends on regional market dynamics. Some academics have argued that expanded U.S. coal exports to Asia will reduce global greenhouse gas emissions by raising domestic coal prices. Environmental organizations and other academics point to the price elasticity of Chinese coal demand, arguing that exports will increase total coal consumption and greenhouse gas emissions.
Within the U.S., studies indicate that investment in energy efficiency and renewable energy would generate twice as many jobs as investing in expanded coal export capacity. From a market perspective, 2012 U.S. coal exports were not always price competitive in Asia. Whereas Chinese coal imports from Indonesia (China’s largest supplier) had an average price of $90 per metric ton, and China’s world average coal import price was $110 per metric ton in 2012, the average price of U.S. coal in China was $130 per metric ton. From a Chinese coal import perspective, U.S. prices were roughly equivalent to Australia and significantly lower than Canada. Compared to domestic resources, coal imports from the U.S. can have a beneficial impact in China due to the low sulfur content of Powder River Basin coal and a safer mining industry in the U.S., though these benefits do not hold up in a comparison with renewable sources of electricity.
What’s the future of U.S. coal exports?
While the future of U.S. natural gas prices is uncertain, the domestic shift away from coal is likely to be sustained by coal power plant retirements and long-term investments in gas-fired electricity generation and renewables. Recent data indicate that U.S. greenhouse gas emissions are diminishing while global emissions continue to grow. However, national greenhouse gas emission inventories currently do not include emissions related to fossil fuel exports.
According to the Department of Energy, the U.S. has a 440 billion-metric-ton demonstrated coal reserve base. With current technologies, consumption of the U.S. coal reserve base, either domestically or through exports, would exceed the global carbon budget of 1,000 Gt CO2 associated with a 75 percent probability of limiting warming to 2 degrees Celsius. The ongoing rise of global greenhouse gas emissions combines with the immense fossil fuel resources of the U.S. to necessitate that climate risks be integrated into decision making.
To understand the full implications of U.S. coal exports for global emissions and the domestic economy, it may be useful for a government institution such as the White House Office of Science and Technology Policy to convene an inter-agency study of expected impacts and policy options. Proposed expansion of U.S. coal export capacity makes the future of exports murky, but it’s clear that utilization of coal resources is one of a few important decisions that will determine our global climate future.
Nate Aden is a PhD student with the Energy and Resources Group at UC Berkeley. The information presented here does not reflect any external affiliations.