When you overview the world energy issues, one would think that coal doesn’t matter. Indeed, the first impression is no one among economists, politicians or energy specialists talk about coal. Even that blog follows the tacit rule with only 3 (now 4) articles about coal when there are so many arguing about gas, oil or nuclear energy. But is that trend real? And why?
Coal represents 28% of the world energy mix today and even the most optimistic scenario of the IEA foresees that it will still have a great place in 2030: how is it possible that its part in the energy debate is not proportionate to its role in the energy mix? It should be part of the energy debate. Moreover, it is said that one coal-fired energy plant is opened every week in China. It is well known that coal is the most carbon intensive fuel. And yet, no issue, no controversy about coal, why?
First, we will try to demonstrate the intuitive result that coal doesn’t count much in the economic debate. Second, we will prove to the contrary that it plays a major role as a source of energy all over the world. Finally, we will consider the characteristics of the coal market in order to explain this apparent contradiction.
There are barely any academic issues about coal. Or at least less than about gas or oil. In order to prove or reject that hypothesis, we did a trend analysis on Google scholar. We counted the number of articles with keywords like “coal”, “oil”, etc, published in the areas Business, Administration, Finance, and Economics for each year. Here are the results:
We observe that the number of articles about coal follows the global rising of the number of articles on energy subjects. But the rising is much more important for articles on Oil and Gas! Thus, there is a real trend and coal doesn’t interest economists as much as oil or gas.
A research on Google Trends (e.g. for the last 12 month with a worldwide research) allows us to draw similar conclusions and shows that both academics and “Google users” have little interest in coal. This research reveals surprisingly the influence of environmental crisis (see the special notes on Gulf Coast oil spill and nuclear drama in Japan) on the public debate, supposing that Google Trends is able to represent it. However, we cannot help to notice the main vectors of debate remain oil and gas, for which we can notice a light correlation as a sign of a link to economics.
A world without coal is today impossible
Coal plays a major role in the world energy supply. It has the second share of world primary energy today, and according all the previsions it will still have a good share in 2030.
For example, in the World Energy Outlook 2010, the world primary energy demand by region in the New Policies Scenario will be steadily growing by 36% in 2035. The contribution of coal to this increase is consequent: approximately a third of the growth will be supported by coal. BP Energy outlook 2030 reaches the same conclusion.
Coal is majorly used for electricity (approximately two thirds). If we have a look at the tendencies of new policies scenario of the World Energy Outlook, we observe that the drop in coal-fired generation that is foreseen to be observed in the OECD, is offset by big increases elsewhere. Coal plays a major role in the base production. In addition to that, what is true for the energy industry, meaning long lifetime investments, remains true in the coal industry as well. As a result, we know for sure that giving coal a major importance will last, according to the lifetime of a coal-fired plant, at least about 40 years.
There is no world market for coal. Coal is local, abundant and relatively expensive to transport
Coal is more or less homogeneously distributed throughout the world. Moreover, with 220 years based on proved reserves (i.e. reserves that are exploitable based on technical economical current conditions), coal represents the biggest potential of energy supply for the future: even if the reserves are frequently reevaluated, it is still about four times the potential for energy supply of gas or oil.
Additionally, there is no world market for coal. First, coal is quite expensive to transport. Indeed, being less dense than oil, it is less suitable for transport, all the more since it is not a fluid. Second, coal is mostly even distributed throughout the world. Thus, only a small quantity of the consumption is internationally traded: in 2008, overall internationally traded coal represented only 18% of the worldwide consumption. As a consequence the international steam coal trade is mainly divided into the Atlantic and the Pacific markets: the market tends to remain regional. Few occurrences of commercial relationships make coal less visible than other fossil fuels.
In that sense, energy supply security remains of good quality as the producing countries are also consuming countries. Japan or Australia, respectively big importer and big exporter, are exceptions compared to a majority of countries that only depend on themselves to produce and consume coal.
Moreover, coal prices are known for remaining quite low and stable, which makes it a concern less to discuss.
At last, the lack of stakes concerning the coal can be summed up by analyzing the reserves-to-production ratios of the three main fossil fuels (see below). The situation is globally better for coal than the others.
An explanation to the lack of debates concerning coal is that the stakes remain too local or too global. Too global indeed, because despite being the “filthiest” primary energy contributing widely to CO2 emissions, these are tackled as a problem not only linked to coal, but as an underlying question of the climate change. A contrario, consequences can be regarded as too local: how dramatic mine blasts accidents are, they only have direct consequences for a limited range of people. Moreover, we evoked the low developed international trade of coal, the absence of tensions on prices or energy security, being a hint that no commercial link is a factor of less debate.
What events could change this quiet status of coal? There are three options for the future of coal. If the environmental constraint increases at an international level, coal might loose its competitiveness and disappear without ever raising any issues. But on the other hand, the hypothetical development of Carbon Capture and Sequestration might maintain coal in a great place in the world energy mix, which will keep it the debate in its current low status. Eventually, the shale gas development in the U.S. could be a substantial change. In fact, the U.S., where more than 25% of the world reserves are, will have the opportunity to export coal if the country decides to replace its coal-fired plants by more environmental friendly (and less capital intensive) gas-fired plants. The creation of a new world coal market could then be a subject specialists might like to discuss about.
Marie-Charlotte Darbois and Alice Joubay, Mines ParisTech