Coal vs gas

Yesterday’s piece in the NYT on coal pointed out some ironies — for example, that many of the countries and jurisdictions that have taken decisions to restrict coal use or put penalties on carbon emissions are now stepping up exports of the black stuff themselves:

The United States now ships coal to China via Canada, but coal companies are scouting for new loading ports in Washington State. New mines are being planned for the Rockies and the Pacific Northwest. Indeed, some of the world’s more environmentally progressive regions are nascent epicenters of the new coal export trade, creating political tensions between business and environmental goals. … As a result, not only are the pollutants that developed countries have tried to reduce finding their way into the atmosphere anyway, but ships chugging halfway around the globe are spewing still more.

But it ignored the elephant in the room: natural gas. 

Coal is cheap and abundant. So China and other developing countries that prioritise the short-term goal of rapid economic growth over the long-term need to control greenhouse gas emissions will continue to buy the black stuff. If Australia, Canada and the US were to stop exporting coal to China on environmental grounds, Indonesia and other exporters would fill the gap.

Development of nuclear capacity in China is one solution — but as bold as the country’s ambitions are, by 2020 nuclear capacity will account for only about 10% of the total in 2008 and about 5% of forecast capacity. For the record, of China’s 800 GW of installed capacity right now about 600 GW comes from conventional thermal generation, the vast majority of which is coal.  (A useful source for this kind of data is here.)

So what’s the solution? Putting a price on carbon won’t really work. First, China is unlikely to agree with any strategy to constrain its consumption of a fuel it sees as critical to economic growth (and, let’s be generous, critical to its ambition to alleviate poverty). Second, as long as everyone keeps buying cheap Chinese goods, it will have enough cash to overcome pricier carbon coal.

The idealist’s green answer is for the US, Canada and other exporters to substitute coal exports to China with exports of the wonderful renewable technologies they’ve all developed. That’s essentially the argument of people like Thomas Friedman, and it’s a good one. Except that we’ve stumbled repeatedly at the first hurdle: finding scaleable green alternatives and proving their worth in our own economies. (NB, coal is still the US’s most important source of electricity.)

That leaves the only viable option: natural gas. The “unconventional glut”, as The Economist described it in my piece from several months ago, offers the best opportunity — now — to control emissions. It’s abundant in ways we never expected, it’s cheap, and it emits half as much carbon as coal when burnt.

Exports of liquefied natural gas from the West coast of North America and from Australia, the two places cited by the NYT for their burgeoning coal-to-China exports, must happen quickly. China’s keen. That’s why its state-owned companies are crawling over shale-gas reserves in North America and coal-bed methane (CBM) projects in Australia.

Yet in both the US and Australia, there is mounting environmental opposition, respectively, to shale-gas and CBM development.

Preventing production of cheap natural gas and stopping the construction of export infrastructure helps one very interested group: the coal industry. Not all environmentalists are opposed to natural gas. The Sierra Club has recognised its potential. But shale-gas drilling has, for many other greens, become their cause du jour.

It’s an unholy alliance between greens who should know better and coal lobbyists who understand all too well the threat new natural gas production brings to their dirty business. Green animosity to drillers is understandable on one level (few people trust the oil and gas industry, especially after Deepwater Horizon). But on the strategic front it makes as much sense as green opposition to nuclear power — which is to say, if you are interested in mitigating climate change, it’s a dumb and damaging position.

We should be doing everything we can to support gasification of China’s economy, not least by promoting rapid expansion of LNG exports. The alternative is more coal — and we know where that will lead.



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