Abby L. Harvey
GHG Monitor
4/3/2015
Coal demand in the United States is likely to continue its downward trend due, in part, to the adoption of environmental regulations and the low cost of lower-carbon fuel sources, according to a study released this week by the think tank Carbon Tracker. The increase in production of cheap shale gas, the Environmental Protection Agency’s proposed regulations for coal-fired power plants, the growth of the renewable energy sector and various additional domestic and international greenhouse gas regulations have lead researchers to conclude that “the only way is down for US coal in the near-term,” according to the report. “Investors who did not foresee the US coal crash lost significant value in the bankrupted coal companies and plummeting share prices of those that have managed to survive,” the report says, noting that “absent a profound reversal of technology and policy trends, we believe the market has fundamentally changed forever and bets on a return to business as usual are speculative.”
Regulation, while it will contribute to the future of the coal market, will not be the market’s most driving force, according to the report. If existing regulations are repealed, or proposed regulations, such as the EPA’s proposed carbon emissions standards for existing coal fired power plants that would require state action to meet federally set emissions reduction targets, are finalized, the effects will ripple through the coal markets, as they have in the past, the report finds. “In theory, regulatory amendments can drive more structural changes within a sector than economic changes due to their longer-term nature,” the report says.
However, these impacts will be far less significant in the near-term than the impact of cheaper lower-carbon sources of electricity, the report says. “In the US, there was no need to wait for a global deal on climate, or even federal regulation labelled carbon/climate, for the coal industry to take a hit. In fact, the factors that undermined coal demand in the US were not primarily driven by the desire to lower carbon emissions but in fact it being overtaken by lower-cost gas and renewables and constrained by a number of regulations tackling environmental pollution broadly. These are precisely the sort of drivers that will contribute to reduced use of high carbon energy sources globally,” the report says.
