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December 17, 2007

King Coal

King Coal was the ghost at the air-conditioned tables of the global warming get-together in Bali. Most of the energy-consuming world can agree that cutting down on the use of $100/barrel oil is a good thing. Moreover, steps governments take to reduce oil imports may have enough economic gain in avoided wealth transfer to offset the cost of clumsy and politicized regulation.

Coal is a different story.

In 2006, according to the US Department of Energy, the top three coal producing countries were China, US, and India. These countries were also the top three consumers of coal in the same order. In China and the US, consumption and production were almost exactly balanced. India, despite its domestic production, imported about 8% of the coal it burned. Production in China (2620 million short tons) and the US (1161 million short tons) dwarfed the rest of the world: #3 India produced only 498 million short tons.

These countries aren’t going to run out of coal anytime soon. The US has the world’s largest known reserves: more than 200 years supply at current extraction rates. China has fifty years worth of known reserves; India actually has more coal in the ground than China so there is a huge potential for increased coal consumption in that energy-starved nation. Russia, which is currently only the #6 producer, has reserves second only to the US. South Africa and Australia also have significant reserves; the rest of the world doesn’t have much.

If the US were to drastically decrease its use of coal, our electric grid would literally blow a fuse and refuse to operate (except in a few lucky places like Vermont with hydro and nuclear power and the North West with its raging rivers). Not only would we have to vastly increase our use of imported oil (and remissions to the Middle East) but we’d also cede all remaining domestic manufacturing to China which would have an increasing energy cost advantage. This a prescription for economic suicide and it won’t happen no matter how many rostrums Al Gore stands at with his hand over his heart, wouldn’t happen even if he were president. Even atmospheric CO2 wouldn’t be reduced much as even more coal would be burned in China and India to manufacture goods to sell to the abstainers.

Are China and India going to foreswear use of their coal reserves? Are you kidding? What’s going to happen to all the coal in Russia when their oil reserves run low?

This is the real dilemma behind all the diplomatic hot air on global warming. Europe, with much of its coal depleted, can posture on the sidelines but, assuming that the increase in atmospheric CO2 needs to be stopped or reversed, the “problem” of awakening giants with huge coal reserves needs to be addressed.

One possible solution is that the developed nations put huge tariffs on goods from countries which burn coal, essentially stopping their economic development until they clean up their act. It’s probably a good thing this is unlikely since it would throttle world trade, further enrich the oil nations, and possibly lead to a worldwide depression.

A better solution  would be to figure out quickly how to sequester the CO2 from burning coal. Very little investment is being made in that technology despite the huge potential it has for reducing emissions. There’s no question that whatever solution for sequestration is found, it will still be more expensive than just letting the CO2 go into the atmosphere. It still might be necessary to use tariffs or the threat of tariffs to get fast-growing nations to adopt these yet to be devised remedies. But, if the incremental cost is low enough (leaving coal cheaper to use than oil) and everybody plays by the same rules, there is a good possibility of effective action. The coal-producing nations will have a way to preserve the economic value of their reserves and their economies.

Conservation will NOT reduce coal use since coal, where it is available, is usually the lowest cost source of energy. Conservation will reduce use of more expensive sources (oil, for example, and natural gas) which is not a bad thing but doesn’t address coal use.

What about solar? And wind? And nuclear? And all other alternatives to fossil fuels? Certainly all of these ought to be developed. Once there is enough incremental supply from any combination of these sources available at a price cheaper than extracting coal (and sequestering the CO2), then those sources will displace coal use and King Coal can be deposed. Until then, we’re well advised to help him clean up his act.

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