The End of Cheap Coal

One of the reasons why the push for Cap and Trade was a good idea was it would not only internalize the cost of carbon emissions, but it would also raise the price of energy created from coal.   With higher prices for kilowatt per hour from coal energy, cleaner energy sources would become competitive.  Currently, cleaner energy sources can barely compete with coal, with exceptions of course.  But if legislation wasn’t going to push up the price of burning coal, then in the long-term, rising international demand would.  That time is now.

In 2009, China has ceased to export coal and has now began to import it.  According to the financial times, in 1993 the same happened to oil.  China’s oil imports exceeded what was being imported and the consequence was a climb in the average oil price, all too well known thanks to oil spiking at $150 a barrel in 2008.  China had been using more oil than it could produce in order to fuel its large amount of economic growth, and oil wasn’t the only commodity.

China isn’t the only player.  India as well as the emerging markets have offered its heavy share of the demand, tipping trade balances toward imports and helping to drive up commodity prices for oil and building materials.   The same is expected for coal.

This is good news for America, which contains the largest coal reserves in the world.  This is also good news for the coal industry, as it will be able to profit from an uptick in prices.

This is not so good for the coal power industry, especially in America.  While the coal industry will benefit in developing nations who have already increased the capacity to burn coal for energy and produce steel from coke, the developed world already faces pressures for pursuing greener technologies instead of burning coal.  And the coal power industry should be scared: the only thing keeping them from not succumbing to the powers of green energy is price, which is now soon to change.  With coal prices higher translating into higher per kilowatt hour energy costs that begin to be on par with greener technologies, the coal power industry will have a tough fight.

Green technologies already have the leg up of being green and renewable.  Obama’s recent moves to push for nuclear energy, which would already be competitive given Obama’s plan, and the ARRA’s subsidizing of renewable resources like wind and solar significantly put the government against the coal power industry.

The government’s backing of renewable energy certainly distorts what the market wants when providing energy, but a needed distortion nonetheless.  The only hope for the coal industry is to level the playing field by either removing green energy subsidies (not likely) or becoming green it self.  The industry’s only hope is going for clean coal. And now, it doesn’t have the luxury of waiting anymore.

Before one says that clean coal isn’t viable, I disagree.  It is possible, given recent developments in innvoation.  I blogged recently about Thomas Friedman’s catch about clean coal:

If you combine CO2 with seawater, or any kind of briny water, you produce CaCO3, calcium carbonate. That is not only the stuff of corals. It is also the same white, pasty goop that appears on your shower head from hard (calcium-rich) water. At its demonstration plant near Santa Cruz, Calif., Calera has developed a process that takes CO2 emissions from a coal- or gas-fired power plant and sprays seawater into it and naturally converts most of the CO2 into calcium carbonate, which is then spray-dried into cement or shaped into little pellets that can be used as concrete aggregates for building walls or highways — instead of letting the CO2 emissions go into the atmosphere and produce climate change.

If this can scale, it would eliminate the need for expensive carbon-sequestration facilities planned to be built alongside coal-fired power plants — and it might actually make the heretofore specious notion of “clean coal” a possibility.

With coal prices expected to rise, you can bet this will scale. With clean coal on the horizon, subsidizing greener technologies won’t be needed anymore or vice versa, coal won’t be dirty anymore. Either way, whether a Cap and Trade bill , favorable legislation towards green technologies or the sheer power of the market was going to force it, switching towards less CO2 intensive energy was inevitable. Now, about those mountain tops…

Will Going Vegan Save the World? Maybe not

A study done by Helmi Risku-Norja and Sirpa Kurppa of MTT Agrifood Research Finland found that if everyone switched to being vegan , only eating fruits and vegetables, then the reduction of greenhouse gases would only be 7%.   So assuming this is true, anyone who is purely vegan for environmental reasons may be making a mistake.  More so is that in a game of dominant strategy, if you wanted to maximize your benefit of saving the planet vs. eating meat, you would need everyone to switch to vegan in order to get the small benefit.   But you can’t rely on everyone to do that.  Since meat is so tasty, the benefit of eating meat certainly outweighs the decision to go vegan.  Unless of course you went vegan for other reasons, such as health (arguable) or ethics.

Of course this game assumes the conclusions are true.  I am of course skeptical of this study, and since I can’t read it, I really can’t say for sure.  But, the article helps illustrate their point: (emphasis mine)

The team explains that for current average food consumption, in Finland, emissions from soil represent 62% of the total emissions. Greenhouses gases released by cows and sheep account for 24%, and energy consumption and fertiliser manufacture about 8% each. The greenhouse emissions performance for extensive organic production is poor, they explain, despite this approach to farming being considered the “green” option, the lower efficiency requires the cultivation of greater areas of soil, which counteracts many of the benefits.

That’s an interesting argument. Non-organic farming does produce more yield per acre. However, here is my issue. 1. This is in Finland, drastically different than elsewhere, especially the United States. I can speculate on their food consumption habits being less turf and more surf. 2. What “greenhouse gases” were they measuring? What raised my eyebrow was that meat emissions were only 24% and the article only listed cows and sheep. Isn’t methane worse? Is methane generated from the extra amount of land needed for organic farming? Either the Finnish (is that right?) don’t eat enough cows and sheep compared to the United States, or I have underestimated the amount of greenhouse gases created from an acreage of farmland. Statistics are not easily available to compare, making these conclusions immediately suspect.

HT: Free Market Mojo