While Trump Tries to Turn Back the Clock, Europe Swears Off Coal
There's a thick black cloud swirling over King Coal's future.
President Donald Trump declared a war on the “war on coal,” promising to repeal environmental regulations in a bid to revive the moribund coal industry. But in the United States and much of the world, reaching for the defibrillator may not be enough to save King Coal: A flood of cheap natural gas and increasingly competitive renewable energy has undercut a once-dominant source of energy. And while the U.S. coal patch in recent years could look overseas for a beacon of hope, exports won’t offer much of a lifeline in the future, either.
The contrasts between the United States under Trump and most of the rest of the world are striking. China, long considered the environmental villain for its embrace of coal-fired power plants and huge increases in greenhouse gas emissions, is now positioning itself as a global leader in the fight against climate change. And while Trump has stacked his administration with climate change deniers and is tearing up environmental protections in a desperate bid to revive an industry that employs fewer people than fast-food chain Arby’s, many other industrialized economies aren’t even trying to resuscitate coal.
Just this week, Europe swore off the stuff. EURELECTRIC, a consortium of 3,500 European utilities, pledged not to build any new coal plants after 2020, citing the need to meet climate-change goals laid out at the big Paris accord in 2015.
“The European electricity sector believes that achieving the decarbonization objectives agreed in the Paris Agreement is essential to guarantee the long-term sustainability of the global economy,” the group said, in a direct rebuttal to the 19th-century energy policies being pursued in Washington.
“The power sector is determined to lead the energy transition and back our commitment to the low-carbon economy with concrete action,” said Antonio Mexia, EURELECTRIC chief and CEO of Portuguese energy group EDP.
Europe’s decision reflects its commitment, on paper at least, to reduce the greenhouse gas emissions that cause climate change. And it doesn’t even have the advantage of a flood of cheap, cleaner-burning natural gas as a substitute, like the United States does.
Because for all the years of GOP wailing about Obama-era regulations on coal pollution, the stake through the heart of the industry came from another fossil fuel — the fracking revolution that unleashed a torrent of natural gas — as well as steady advances in wind power and solar energy.
U.S. coal production peaked in 2008 at 1.1 billion tons. Since then, it’s plunged precipitously to 739 million short tons last year, according to the Energy Information Agency. That’s a reflection of falling demand for steam coal to run power plants. Even top coal executives admit Trump can’t magically boost jobs in coal mining, though they welcomed his pledges to gut federal industry regulations.
Trump’s plans to scuttle the Obama administration’s “Clean Power Plan,” which would have made states find ways to generate electricity more cleanly, will remove the federal government’s main tool for cleaning up the power sector. But it may not matter very much. Many states have their own environmental and emission standards. Few companies are willing to make billion-dollar bets that today’s lighter regulations will still be law in four years time.
And ultimately, economics matter: Natural gas plants are cheaper and quicker to build than big coal plants. A recent Reuters survey of 32 domestic utilities found that, despite the Trump administration’s boosterism, most “have no plans to alter their multi-billion dollar, years-long shift away from coal.”
If domestic demand can’t keep the coal industry afloat, what about foreign markets? That proved a lifesaver as recently as 2012, when U.S. coal exports peaked at 125 million tons, including plenty to Europe. Looking ahead, coal companies then eyeing Asia saw fast-growing economies hungry for new power plants and expected to find new markets across the ocean. A consortium of coal companies bid to build six new West coast export terminals to open access to those Asian markets. Since then, four of the six projects were killed, one is on life support, and the future of the last, the Millennium Bulk Terminals on the Columbia River in Washington, is uncertain.
The hurdles for U.S. coal exports are plentiful. Transit costs and logistics issues can quickly price U.S. coal out of foreign markets, especially with limited West-coast infrastructure. China sorted out its own domestic coal production, slashing imports of steam coal; the market that’s left is dominated by Australia, a big low-cost coal producer nearby. And Europe, which gobbled up American coal displaced by the flood of gas just a few years ago, is swearing off the stuff. U.S. coal exports have dropped over 50 percent since the 2012 peak, to 60 million tons last year.
“A lot of industry leaders today would say their worst domestic deal would be better than their best export deal,” said Andrew Moore, managing editor of S&P Platts Coal Trader. “Pricing has to be really good for foreign trade to sustain itself,” he told Foreign Policy.
There is one tiny potential bright spot for the sector: high-quality metallurgical coal used in steelmaking. Europe still imports sizeable amounts of met coal from the United States — a boon to beleaguered Appalachian miners — and China this month is snapping up U.S. met coal to replace Australian shipments knocked offline by storms. But it remains a tiny slice of overall production, and with the steel sector struggling with production overcapacity nearly everywhere, doesn’t really look like much of a growth industry.
That doesn’t mean King Coal’s obituary is ready to be written. Industry experts expect a rebound in coal’s fortunes in the United States this year, if only because 2016 was so awful. Despite plenty of plant closures and the boom in renewables, coal still generates about 30 percent of U.S. electricity, likely a natural floor for the fuel that once dominated the sector and the skyline.
“The coal industry in the U.S. isn’t growing, but it’s certainly not going away either,” Moore said.
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