Europe is Burning More American Coal

Natural gas production is booming in the United States. The resulting low natural gas prices are helping the fuel displace other energy sources, most particularly the use of coal to produce electric power. As U.S. demand for coal falls, so has its price and as a result. One big buyer: Europe.

Ironies abound in this Washington Post report on growing European use of coal. The EU has elaborate and costly greenhouse gas regulations while the U.S. has failed to implement any systematic federal greenhouse gas policies. European nations like Germany, Spain, and Denmark are frequently cited as models for their support of renewable energy. And, with these policies in place, greenhouse gas emissions are falling in the United States and Europe is burning more coal. Apparently good intentions are not enough. The Wall Street Journal had a similar report yesterday: “U.S. Coal Finds Warm Embrace Overseas.”

One more point: All that “good news” about reductions in U.S. greenhouse gas emissions is mitigated a bit by tracing through the economic logic. We’ve displaced some coal consumption by increased gas consumption, but much of that coal is simply being burned in Europe or China or elsewhere. U.S. coal production has been relatively flat for two decades, but U.S. coal exports have doubled since the 2006. (See EIA data here.) So we’re cutting emissions, but there will be essentially no climate change pay-off from the cuts. This same consequence would have arisen had the U.S. shifted from coal to natural gas because of carbon taxes or an effective U.S. cap-and-trade scheme (except in that scenario we pay more for energy rather than less. Technological improvements rule!).

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