MAC: Mines and Communities

Coal Consumption Booms Amid Rising Climate Concerns

Published by MAC on 2012-12-27
Source: Huffington Post, Mining.com (2012-12-20)

Coal Consumption Booms Amid Rising Climate Concerns: IEA Coal Report 2012

Huffington Post

18 December 2012

In a report destined to frustrate advocates for global action on climate change, the Paris-based International Energy Agency projected Tuesday morning that in five years' time, the amount of coal burned around the globe every year will increase by an additional 1.2 billion metric tons -- an amount roughly equivalent to the current annual coal consumption of the U.S. and Russia combined.

The uptick, virtually all of it attributable to rapid economic expansion in China and India, comes even as the U.S. continues to experience decreases in coal use for electricity generation amid the availability of cheap and plentiful natural gas -- which has a smaller carbon footprint than coal when burned.

Without even including India and China, however, the drop in U.S. coal consumption is easily negated by a commensurate uptick in coal use elsewhere in the world. And adding in those two countries, whose voracious appetite for cheap electricity has altered the global coal market over the last decade, presents what the IEA's executive director, Maria van der Hoeven, called "a troubling paradox."

"To the degree that affordable coal has allowed hundreds of millions of people in emerging economies to enjoy the conveniences that the industrialized world began taking for granted long ago, its proliferation is a blessing," van der Hoeven wrote in commentary accompanying the release of the report. "Yet for a society increasingly concerned about the amount of carbon it is sending into the atmosphere, the surge in coal burning is not good news."

The surge, the IEA noted, is unfolding in the continued absence of much-touted "clean-coal" technology, which would ostensibly capture and contain the carbon pollution arising from coal use, but which has so far failed to prove commercially viable. As it is, coal is the leading source of planet-warming emissions, accounting for more than 40 percent of all emissions currently, according to the U.S. Energy Information Administration. That figure is expected to increase to nearly half of global emissions over the next 25 years.

The IEA report comes against the backdrop of indecisive climate change talks in Doha, which closed earlier this month with little in the way of global agreement on cutting emissions. A raft of recent reports from a variety of organizations -- including the United Nations, the World Bank and others -- also suggest that the lack of action is making it exceedingly likely that global average temperatures will rise beyond levels that countries had previously agreed it would be best to avoid.

"This analysis underscores the need for a global movement to stop the madness of business as usual," said Daniel Kessler, a spokesman for the climate-action group 350.org. "Coal use can't be like a bump in a rug, moving from one spot to another. The reality is that we need to keep 80 percent of all fossil fuels underground if we are going to avoid the worst impacts from climate change. And that can only happen if we work across borders in a unified front against the fossil fuel industry, whose business model is dependent on cooking the planet."

If nothing else, however, the IEA numbers highlight the complexities of implementing global emissions curbs, and the tensions inherent in solving a problem that was created by already-industrialized nations, but which will be exacerbated going forward by developing economies keen on enjoying the same benefits of modern life at minimal cost.

Despite regional booms in natural gas development, and excluding the costs of its impact on human health and the environment, coal remains, on a global average, as much as 7 percent cheaper than natural gas for generating electricity, and 19 percent cheaper than nuclear power.

While the two countries are at vastly different stages of development, China and India -- the planet's two most populous nations with over 1 billion inhabitants each -- will account for more than 90 percent of the global uptick in coal use over the next five years, or 77 percent and 22 percent, respectively, according to the IEA report.

Both have contributed significantly to the global expansion of coal-based electricity generation, which has more than tripled over the last three decades.

In an analysis published last month, the World Resources Institute, a sustainable development advocacy group, identified plans for as many as 1,200 new coal-fired power plants worldwide. Roughly 76-percent of that proposed coal-fired capacity was located in China and India.

By almost any measure, China is now fully industrialized, accounting for the highest share of global greenhouse gas emissions. On a per-capita basis, China is still somewhat less polluting than the U.S., though it now roughly matches per-capita emissions in the European Union.

But the IEA report suggests that even if China's impressive annual economic growth rate were to fall by half over the next five years, coal demand would still increase -- both globally and in China.

And following China's lead, economic growth in the rest of the developing world -- and the attending demand for cheap and accessible electricity -- still has a very, very long way to go.

"Even if every currently proposed power plant in India is built, then by 2020, India will still only have the power generation capacity equivalent to one-half of the level the U.S. had in 1950," said Laszlo Varro, the head of IEA's gas, coal and power division. "Most of these power plants," he added, "are coal plants."

India is expected to become the world's largest seaborne importer of coal by 2017, according to the IEA.

Last month, the World Bank issued a dire analysis that, "without further commitments and action to reduce greenhouse gas emissions, the world is likely to warm by more than 3-degrees Celsius above the preindustrial climate."

The organization warned that even if the current emissions reduction commitments and pledges made by various nations are met, an increase in global average temperatures of as much as 4-degrees Celsius, or 7.2-degrees Fahrenheit, is possible.

"A 4-degree Celsius world would be one of unprecedented heat waves, severe drought, and major floods in many regions, with serious impacts on ecosystems and associated services," the World Bank noted -- though the organization came under fire more recently for what critics called its "hypocrisy" in arguing for action to curb global emissions, while also considering financing for a coal-fired plant in Mongolia.

Robert Bisset, a spokesman for the World Bank's climate policy and finance division, pushed back on that charge, however -- and highlighted the disproportionate responsibilities that he believes must be reckoned with if nations are to find a way forward on the climate conundrum.

"The problem with coal emissions rests squarely in the most highly-industrialized nations," Bisset said. "If you took all the developing countries in the world and added up all their emissions together, it still would be one-third of the emissions of the U.S., European Union, and China combined -- just one-third.

"The World Bank Group only invests in coal in very rare circumstances," he added, "when poor countries have no other realistic options to rapidly ramp up renewable energy alternatives and power is needed for basic energy needs for hospitals, industry and factories, and to light schools, heat homes and cook meals."

Tuesday's IEA report notes that aggressive carbon pricing could help drive down the use of coal globally, although such pricing would have to expand well beyond regional markets like that currently deployed in Europe. "The European carbon market has had very little impact on coal use," IEA analyst Varro said, adding that government policies that drive development of renewable energy sources like wind and solar can also mitigate the coal trend.

In the absence of a high carbon price or rapid expansion of renewables, low-priced natural gas can effectively reduce coal demand, the organization noted -- though whether the U.S. experience on this front can be replicated in places like China or India is an open question. Varro noted, for example, that while China has deep pockets of natural gas trapped in shale strata similar to that in the U.S., a variety of factors -- including geology and water scarcity -- are hampering development of the resource.

"If the Chinese want it, anything which does not contradict the laws of physics tends to happen very rapidly in that country," Varro noted. "But shale gas does not seem to be happening very rapidly."

All of which leaves advocates for cooperative action on climate change worried.

"The new IEA forecast brings concerning trends regarding the world's increasing dependence on coal," said Ailun Yang, a senior associate with the World Resources Institute. "The bottom line is clear. Coal is not dead or even dying. In fact, it's thriving in many parts of the world. It's particularly troubling for people in the developing world, where the majority of future coal plants are projected to be.

"There seems to be a growing belief that coal is 'inevitable' for economic development," Yang added. "Certainly, everyone has the right to reliable and low-cost energy, but there are clearly more sustainable choices available. We need to decouple coal from economic development to reduce the negative impacts on people's health -- and the global climate."


Coal to challenge oil as main source of energy by 2017

Cecilia Jamasmie

Mining.com

18 December 2012

Coal is likely to overtake oil as the world's main source of energy in the next five years, with potentially devastating effects in the environment, says the International Energy Agency (IEA).

According to IEA, the globe's leading authority on energy economics, one of the prime factors behind the rise in coal use has been the massive increase in the use of shale gas in the U.S., which has a smaller carbon footprint than coal when burned.

The decline of fuel consumption in the U.S. has helped to cut prices for coal globally, says the IEA report, which has made it more attractive even in Europe, where coal use was supposed to be discouraged by the emissions trading scheme.

The Paris-based agency predicts the amount of coal burned around the world every year will increase by an additional 1.2 billion metric tons - an amount roughly equivalent to the current annual coal consumption of the U.S. and Russia combined.

Unlike conventional oil and gas, coal is widely available, easy to find and it can be cheaply extracted. For these reasons, the fuel was used to meet nearly half the increase in global demand for energy in the past decade.

According to the IEA, demand from China and India will drive coal use in the next five years, with India on course to overtake the U.S. as the world's second main consumer. With China as the largest coal importer and Indonesia the biggest exporter.

The agency's Medium-Term Coal Market Report 2012 warns that even if China's remarkable annual economic growth rate were to fall by half over the next five years, coal demand would still increase, both globally and in the Asian country.

In fact the IEA projects that Chinese coal consumption will account for more than half of all coal demand as early as 2014.

The agency's executive director, Maria van der Hoeven, qualified the news as "a troubling paradox."

"To the degree that affordable coal has allowed hundreds of millions of people in emerging economies to enjoy the conveniences that the industrialized world began taking for granted long ago, its proliferation is a blessing," van der Hoeven wrote in commentary published by the Huffington Post.

"Yet for a society increasingly concerned about the amount of carbon it is sending into the atmosphere, the surge in coal burning is not good news."

With no policy backlash, the world faces the prospect of an increased risk of environmental damage as a result of a roaring consumption of the highest carbon fossil fuel.


A coal factsheet for the future

Joshua Zapf

Mining.com

20 December 2012

The International Energy Agency (IEA) is a Paris-based intergovernmental organization formed in the wake of the 1973 oil crisis. The IEA acts a policy adviser to its 28 member states. It also works with non-members such as Russia, India and China, in efforts to promote alternatives to fossil fuels.

Recently the IEA came out with a report claiming that, "coal's share of the global energy mix continues to rise, and by 2017 coal will come close to surpassing oil as the world's top energy source"

Here are some of the other startling highlights from the IEA's Medium-Term Coal Market Report 2012 Factsheet:


Coal export trade raises alarms for Western states

By Patrick Rucker

Reuters

21 December 2012

 

WASHINGTON - Western states that rely on receipts from coal sales to help fund their governments are concerned the mining industry is dodging royalty payments on lucrative U.S. exports to Asia.

By valuing coal at low domestic prices rather than the much higher price fetched overseas, coal producers can skip a large royalty payout when mining federal land.

The practice could add up to hundreds of millions of dollars in forgone royalties if exports to Asia surge in coming years as the industry hopes, Reuters found.

Wyoming warned federal officials about flaws in the royalty system a year and a half ago. Last week Montana Governor Brian Schweitzer said he will not tolerate the coal industry skirting royalties: "If there's phony baloney going on, we have to get to the bottom of it."

Montana and Wyoming get half of federal royalties on coal from their states.

Asian energy demands mean several million tons of the black rock typically move from the Powder River Basin in eastern Wyoming and Montana across the Pacific each year. Taxpayers have a stake in those sales since the region is mostly on public land.

Powder River Basin sales are uncommonly profitable for miners like Arch Coal, Peabody Energy Corp. and Cloud Peak Energy since coal worth about $13 a ton last year domestically could have fetched roughly 10 times that in China.

Last year less than 5 percent of Cloud Peak coal was shipped to Asia but that accounted for nearly 19 percent of revenue, or about $290 million.

Federal and state officials have said that the mining industry is two steps ahead of regulation as it moves into Asian markets and that the current rules that value coal are open to abuse.

Questions about royalties and taxpayer interests could flavor a dispute about whether coal export terminals should be built in the Pacific Northwest.

Activists in Oregon and Washington have vowed to block coal trains that the mining industry hopes will link the Powder River Basin and Asian markets. Coal export foes say local communities will be harmed by mile-long coal train traffic, and scientists warn that coal power is worsening the impacts of climate change.

Vagaries of Royalites

Officials expect coal royalties to be paid on the highest value for the fuel, which is typically the price utilities are willing to pay.

But regulators fret that miners are selling to sister companies at low domestic prices and then pocketing gains when that coal eventually reaches Asian power plants, thus circumventing the higher royalty.

Arch Coal, Cloud Peak and Peabody Energy declined to comment on how they book Asian sales, but they boast to investors about their profitable trade and brokering business.

That business is booming.

About 54 percent of coal export sales from the Powder River Basin was handled by brokers last year while only about 16 percent of such sales east of the Mississippi River was handled that way, according to the Energy Information Administration.

The Office of Natural Resources Revenue, an agency of the Interior Department, has struggled to find the true value of coal when brokered deals and direct-to-utility sales produce different prices for the fuel.

The agency's benchmarks for finding the true value of coal "have proven difficult to use in practice," the agency wrote in May 2011 as it mulled royalty rules that it said were open to abuse.

In a letter supporting tougher rules, the Wyoming Department of Audit beseeched ONRR to "not allow coal producers to create affiliates to reduce the royalties paid."

The mining industry, though, defended the status quo in several letters to regulators.

An ONRR spokesman said officials were committed to collecting every dollar due taxpayers, but he could not comment on when final royalty valuation rules might be proposed.

Autumn Hanna with nonpartisan Taxpayers for Common Sense said the government must quickly put rules in place to protect the public interest on coal sales.

"Taxpayers stand to lose day by day with the existing rules," she said. "The new rules are needed now."

Future Exports

The coal trade has become a controversial issue in the Pacific Northwest where miners want new terminals to allow about 150 million tons of coal a year to be exported from the Powder River Basin.

While politicians spar over whether those ports should be built, there is less friction about what taxpayers are due.

"The Department of the Interior should ensure these companies pay royalties on the full value," said Oregon Senator Ron Wyden, whose staff has met with federal officials in recent weeks to discuss the issues raised by Reuters reporting.

Wyden, a Democrat, will chair the Energy and Natural Resources Committee in the next Congress.

Alaska Senator Lisa Murkowski, the ranking Republican on that committee, believes the government should allow coal exports but officials must protect taxpayers' stake in such sales.

"We know Interior is looking at this and we wait to hear what they find," said a Murkowski spokesman, who noted the senator believes Congress should be setting rules on royalty payments.

Montana Governor Schweitzer, who leaves office next month, has roundly supported the coal terminal expansion, but the straight-talking rancher and miner said taxpayers must get a fair cut on those Asian sales.

"We need to collect on the actual value," Schweitzer told Reuters in an interview.

(Reporting by Patrick Rucker; editing by Prudence Crowther)

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