Coal demand on the rise in Europe?!

With a growing population and increasing industrialization, China has been at the center of a debate over its projected coal consumption and the impact on greenhouse gas emissions. In its 2011 World Report, the Information Energy Agency (IEA) predicted that “the overwhelming bulk of any future growth in coal demand will come from non-OECD countries”, namely China and India [1].  While Asian imports have been on the rise, European countries have traditionally been the world’s largest coal importers and it appears to be rising.

IEA World Energy Outlook 2011

IEA World Energy Outlook 2011

Despite a heavy focus on renewable energy in countries like Germany and Spain, a carbon cap and trade system, and an emissions trading system, coal imports have been on the rise across the European Union.  With Germany’s ban on nuclear power generation (it has already closed 8 of its 17 power plants) and its ongoing debate to allow hydraulic fracturing, Germany has been partially filling the gap with imported coal [2]. Also, this week, Italy’s largest utility, Enel SpA, announced that it is looking to buy several million metric tons of North American and Columbian coal due it’s low cost as a result of excess supplies [3].

Hydraulic fracturing has led to an abundant supply of cheap natural gas in the U.S. reducing the demand for domestic coal.  But U.S. coal producers have not been standing idly.  A lack of domestic demand has reduced global coal prices making it attractive to buyers abroad.   According to the U.S. Energy Information Administration’s Annual Energy Review 2011, U.S. average coal prices declined by over 7% between 2010 and 2011 (2012 data is not yet available).  On March 12, the U.S. Energy Information Administration (EIA) released it short-term energy outlook report which announced that U.S. coal exports hit a record 126 million short tons in 2012, a 17% increase from 2011 [4].  While this may be good news for coal producers, it has been an alarming trend for environmentalists. When combusted for electricity, natural gas produces approximately half as much carbon dioxide as coal.  Fuel switching from coal to natural gas in the U.S. is reducing carbon emissions domestically, however, this trend may not be global.

In the U.S.,  “CO2 emissions from domestic energy have declined by 8.6% since a peak in 2005, the equivalent of 1.4% per year” [5].  However, a report by the Tyndall Center for Climate Change Research believes that half of the avoided emissions in the U.S. through a decline in domestic coal consumption may have been exported.  Thus, while the U.S. is seeing declining emissions, global emissions are still rising.  But the situation may be more dire than that.  A new report co-authored by the Carnegie Institution for Science believes that switching all existing power plants to carbon free sources today would not avoid rising global temperatures [6].  The report argues that there is sufficient carbon dioxide in the atmosphere to affect global warming.

Nevertheless, as the world’s second largest coal producer, a decline in coal exports would reduce global emissions and the uptick in European coal demand may be a short-term problem.  The European Union’s Large Combustion Plant Directive, which requires older coal plants to meet lower emission levels by the end of 2015 or be mothballed, may be driving current demand for coal [7].  In addition, the Tyndall Center study claims that U.S. coal producers may be selling surplus supplies of coal at razor thin margins and may begin to cutdown on production if prices don’t increase.  But this may be an unlikely scenario if demand for coal in China and India reach levels predicted by the IEA.

[1] World Energy Outlook 2011, International Energy Agency

[2]http://online.wsj.com/article/SB10001424127887323293704578334181310238980.html

[3]http://online.wsj.com/article/SB10001424127887323419104578376392666220144.html?mod=WSJ_Energy

[4] http://www.eia.gov/forecasts/steo/report/coal.cfm

[5] http://www.tyndall.ac.uk/publications/technical-report/2012/has-us-shale-gas-reduced-co2-emissions

[6] http://news.nationalgeographic.com/news/energy/2012/03/120314-natural-gas-global-warming-study/

[7] http://news.nationalgeographic.com/news/energy/2013/03/130315-us-coal-exports/

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2 Comments

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2 responses to “Coal demand on the rise in Europe?!

  1. acking1

    Is Germany’s shift away from nuclear power mostly a reaction to what happened with the Diichi reactors in Fukushima? I can understand the fears that people have w/ nuclear power sources, but I can’t really understand why people see coal as a better alternative. It seems like a step backward to me.

  2. hirsch2013

    Thanks for posting such a thoughtful and well-written analysis on rising coal usage in Europe. I completely agree with acking1 that a shift from nuclear power towards coal feels like a step backwards. It seems like Germany’s reasons for turning off their nuclear power plants is mostly fear driven which is very unfortunate. If the US had reacted that way I would’ve been very disappointed. And then on top of that, to start burning additional coal to make up the needed energy!?

    We should feel confident in the safety measures in place to protect us against nuclear power plant disasters. If we think there are gaps in safety, rather than shutting the facility down entirely, shouldn’t we first try and investigate the issues to see if they can be remediated?

    Also, the findings in the report co-authored by the Carnegie Institution for Science is incredibly frightening. Does this mean that global warming is basically inevitable at this point and there is really little we can do to reverse it or prevent it from worsening?

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