Why Does Old King Coal Still Rule?

Despite better alternatives and concern about climate change, coal isn’t disappearing any time soon.

Coal trains passing through Denver

Photo by John Moore/Getty Images

Tankers line up along the Chesapeake Bay waiting to fill their holds with coal. From my vantage point in Annapolis, Md., near Sandy Point Park, on a clear day I can see dozens of ships, some underway and others anchored, waiting their turn at the coal terminal in Baltimore. Hulking red or black rusted boxes, they hail from Singapore, Liberia, and Panama. Many of them won’t unload in U.S. waters—coal exports are booming nationally, up more than 30 percent last year and setting records.

Coal is dirty. It’s dangerous. It’s the single biggest contributor to the heat-trapping gases that cause climate change. But for all its Dickensian downsides, we use a lot of coal. It’s cheap. It’s abundant. And it’s going to be in use for a long time. Until recently, coal fueled half of the electricity generated in the United States. That number was whittled to 42 percent last year, mostly due to a new flood of cheap natural gas that made it economical for power plants to make the switch from burning coal. 

Efforts to use cleaner sources of energy in the United States have put coal in a state of flux. Air pollution regulations have forced power plants to clean up emissions from their smokestacks or shut down. Many operators are choosing natural gas rather than upgrading outdated coal plants. And renewable energy sources like wind and solar now vie for up to 20 percent of the electricity generated in states such as South Dakota and Iowa. But don’t be fooled into thinking coal is on a deep dive.

While coal consumption in the electric utility sector is down 10 percent, the world’s appetite for coal is driving up the demand for coal like never before. In 2011, U.S. coal exports were valued at $16.2 billion. And now coal producers are eager to supply the newest growth market: Asia.

Peabody Energy is the largest producer of coal in the United States. Over the past five years, the company has secured long-term contracts to supply coal to China and India, and achieved record sales revenue of $7.97 billion in 2011, up 18 percent over the previous year. Smaller coal producers, too, have entered into contracts with the Asian market. In August, Appalachian producer Booth Energy Group signed a 25-year, $7 billion agreement committing to supply 9 million tons of coal annually to India from its mines in Kentucky and West Virginia.

In 2008, two events led to an unprecedented rise in U.S. coal exports: A severe winter in China increased demand for coal for heating, and floods in Australia cut off that country’s supply of coal to the Asian market. The surge was temporary, but it laid the groundwork for current export expansions.

United States exports will continue to fuel the world’s burning desire for coal, especially shipments to Europe. Why? Even though Europe has policies that encourage low-carbon energy, the demand for coal has grown in the first half of 2012 because coal prices there are lower than those for natural gas. In 2011, the United States exported 107 million tons of coal abroad; half of it went to Europe, and Asia was the second-largest destination.

Coal will remain a major fuel source domestically over the next 10 years, says energy analyst Elias Johnson of the U.S. Energy Information Administration. That’s even though about 10 percent of the coal-fueled power plants are scheduled to be retired. “Coal is our most abundant fossil fuel,” Johnson says. “Even with legislation on emissions, coal will still play a significant role.”

Jeff Deyette, an energy research analyst at the Union of Concerned Scientists, agrees. The decline in coal will be gradual with no major drop-offs, he says, adding that coal could drop down to 30 percent of our electricity capacity in the next 10 years. Beyond that, the trend will depend on climate policy and whether the coal industry can overcome technical hurdles to cleaner coal plants. “If we are able to do that adequately, there’s a somewhat brighter future for coal in the U.S. Otherwise, it will gradually decline and be replaced by cleaner options,” Deyette said. “But there is no guarantee that the coal will just stay in the ground here if we stop using it.” Coal will still be mined for other countries that haven’t switched to cleaner energy options.

About three-fourths of coal-run power plants in the United States have outlived their 30-year life span, says Deyette. Decisions to upgrade or shut down have slowly resulted in natural gas replacing coal. Ultimately, Deyette says, breakthroughs in technology to capture carbon and store it so that it doesn’t enter the atmosphere may be the biggest hope for coal’s survival.

Meanwhile, exports are hitting a glitch. Coal export facilities at ports can handle only so much volume, creating bottlenecks in the supply chain, and railways are near capacity. The coal-export facility at the Port of Baltimore has proposed a 10 percent expansion in capacity. Peabody Energy’s Gulf Coast export terminals plan to double Peabody’s export capacity to between 5 million and 7 million tons annually between 2014 and 2020. But perhaps the most hotly contested port expansions are the new coal-export terminals proposed in the Pacific Northwest. Western coal producers see it as a shortcut to the Asian market. However, efforts to develop these ports have been met with ferocious opposition.

Mary Anne Hitt, director of the Sierra Club’s Beyond Coal campaign, is happy with the export gridlock. Of the 200 new coal plants on the drawing boards in 2002, she says, 174 have been defeated. She says “the grand plans of the industry” to increase exports or develop the coal industry in India and China “should be treated with the same skepticism we should have treated those plans back in 2002.”

“Exporting coal halfway around the world to places that are poor, the math doesn’t add up,” Hitt says. “There are a lot of big dreams out there, but it’s very unclear whether they are really going to become reality.”

So, what exactly is our energy future? Ron Pernick is co-founder and managing director of Clean Edge, a research and advisory firm on energy and clean technologies, and co-author of Clean Tech Nation. He doesn’t believe in a single-source energy future for us, and says coal will have a role. “We will continue to be a very diverse energy system, but the future belongs to that triad combination of natural gas, renewables, and efficiency,” he says.

Shipping our abundant coal reserves around the world may be coal’s economic salvation, but Pernick says it’s not the answer and is perhaps even more problematic for our health and environment than burning it at home. “Shipping coal to Asian megacities with weak air pollution regulations means coal emissions will come floating right back from China,” he says.

Killing coal won’t happen any time soon. Living with it will be the trick.

Correction, Nov. 2, 2012: The first chart in this article originally mislabeled coal reserves as being in metric tons rather than millions of metric tons.