Does China Really Need U.S. Coal?

Endless Coal MythThere are many reasons to oppose exporting U.S. coal to Asia through five planned terminals in the Pacific Northwest, including huge health, safety and environmental risks.

But what if the entire underlying economic rationale—China’s supposed insatiable demand for U.S. coal exports—rests on a house of cards? What if that perceived and anticipated market, even if it once existed, now no longer exists?

That’s the theme of a Greenpeace report issued this week, The Myth of China’s Endless Coal Demand: A missing market for U.S. Exports.

“The U.S. coal industry – reeling from sagging domestic demand, plummeting profits, and tanking stock prices – is desperate for a new market for its wares, and it thinks it has found one in China,” Greenpeace says. “But in reality, the Chinese market for U.S. coal exports may dry up before major new U.S. coal shipments ever reach its ports.”

The 18-page report identifies various factors that cast doubt on the future of Chinese demand for U.S. coal, including new national and local policies in China aimed at reducing air pollution and capping coal use, slowing economic growth, surging renewable energy growth, and increased public concern about air pollution.

“Many of the same factors that are causing coal to be phased out of the U.S. market – sluggish economic growth, a rapidly developing renewable energy sector, government policies and social opposition to coal – are conspiring to make the Chinese market for U.S. coal exports economically unviable as well,” says Greenpeace East Asia Energy Analyst Lifeng Fang, who wrote the report.

The report also describes earlier coal export proposals that failed in part because of unstable Asian demand, and argues that the current push to export U.S. coal to China through the PNW by companies such as Arch Coal, Cloud Peak Energy, and Australian upstart Ambre Energy are motivated by a desperate industry, not sound economics.

In addition, China produces nearly all of the coal it consumes. It has about 170 billion tons of coal reserves, according to the Chinese Ministry of Land and Resource, and those reserves account for 19 percent of the global total, trailing only the United States for coal reserves. China is also the world’s largest coal producer.

Meanwhile, the Greenpeace report notes that coal use in China is flattening out. “The thermal power generation growth rate was -0.4 percent in the first ten months of 2012 compared to the same period in 2011. One reason for the decline is overall weak total electricity consumption due to the economic slowdown. Another reason is China’s growing adoption of hydroelectric power, which increased 27.1 percent in the same period.”

China is also in the process of decoupling economic growth from coal through policy caps designed to slow growth in coal production and consumption by the end of 2015 “to conserve resources and protect the environment,” the report says.

China’s third largest city, Guangzhou, recently announced that it won’t allow new coal power capacity within the city, and other major cities also plan to limit coal expansion in order to meet air quality standards.

And yet another point – renewable energy is popular and surging in China.

With all this going on there is no apparent reason to keep coal export plans on the table. If the underlying rationale – a huge market –for exporting U.S. coal to Asia through PNW terminals has gone away, shouldn’t the whole infernal idea go away? Immediately?

[Image: Coal pileups at Qinhuangdao port. Photo by Greenpeace/ Liu feiyue from the Greenpeace report]

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