In his recent editorial, Tracy Warner writes that the United States has much to gain economically from exporting coal to Asia markets through Northwest ports but questions the global environmental impact. He poses the question, “Will keeping U.S. coal ‘in the ground where it belongs’ reduce coal burning and greenhouse gases?”
This is an important question. The proposal to export coal through the Northwest is controversial and complex, and some have already made up their minds — with or without taking a close look at the facts. This year a student team from my graduate cost-benefit class took a close look at the coal ports issue. I asked them to pay careful attention to the net effect of these projects on our environment. My students turned in their final report last month, but we talked about the topic for an hour or so each week throughout the year and shared sources. My thinking has been influenced by theirs and vice versa. In case it’s helpful to Mr. Warner and others, I’m pleased to share our thoughts on his question.
We saw two issues: Will U.S. coal exports lead to an increase in coal consumption now and will they slow the transition to cleaner technologies down the road? At the same time, we should make it clear that the success or failure of efforts to fight greenhouse gases does not depend upon the success or failure of these projects. Weighed against current consumption these projects are pretty small beans. South and East Asia consumes 6 billion metric tons of coal per annum. China alone used approximately 4.5 billion tons of coal last year, almost as much as the rest of the world combined. Oregon’s Morrow Pacific project proposes to ship 4.4 million tons a year, perhaps increasing to 8.8 million tons. Adding the two Washington projects, the Millennium Bulk Terminal in Longview, and the Gateway Pacific Terminal project in Cherry Point, on Puget Sound near Bellingham, would add less than 100 million tons to the Asian total. Altogether, this is about 2 percent of China’s current coal consumption and less than one-tenth of its annual increase.
Would increased U.S. coal exports increase current coal consumption? Probably not. Asian coal users have plenty of low-cost coal. U.S. coal exports won’t reduce their marginal costs or provide an incentive to increased coal use. What U.S. coal does is give them another opportunity to substitute cleaner coal for dirtier coal. Worsening air quality in major cities in China and other Asian countries has brought attention to the need to reduce emissions. China has to: It has doubled its electrical generation capacity to 1,000 gigawatts in the last decade, with more capacity added in the last six years than the entire period from 1949-1999.
The key point is that not all coal is created equal. Coal from the U.S. West, including the Powder River Basin, is better for the environment in almost every way than the coal mined by East Asian countries like China. This is particularly the case with regard to sulfur dioxide and nitrogen oxide levels. Even after transportation costs are taken into account, U.S. coal is highly competitive with other equally clean alternatives. And, selling U.S. coal abroad will tend to raise its price at home, perhaps accelerating our transition to renewable technologies, including wind and solar.
Will U.S. coal exports slow Asia’s transition to cleaner technologies down the road. The answer to that question is less clear. But it is clear that here too the answer goes to the demand for coal not its supply. The U.S. is doing its part. President Obama recently called for an end to World Bank “financing for new coal plants overseas — unless they deploy carbon-capture technologies, or there’s no other viable way for the poorest countries to generate electricity.” We’ve also intensified our climate cooperation with major coal users like India and China. Certainly, the Chinese are showing a strong interest in reducing their carbon footprint. China has become a leading investor in renewable technologies.
The reality is that the economics of these issues is not simple. People are impassioned about coal nowadays. I understand that. But the job of academics — and economists — is to raise difficult questions, find the answers that are available, and do the best to provide those answers to the public. That is a challenge I take seriously. I would ask that we all try to rise above the cacophony and have a conversation about coal, climate change, and economics.
Similar to the United States, which still depends on coal for almost half its power, Asia is using the energy source to power its development and industrial economy. It is cheap, plentiful, and the best option economically. Shipping cleaner coal from the United States to Asia via Northwest terminals entails tradeoffs, as do all activities. But its net economic and environmental benefits are clear. If Asia is to continue using coal in increasing levels — as all estimates show they will do – it’s better for them and for us if that coal be of high quality.
As a professor, my goal is to push back on the conventional wisdom, and encourage my students to dig a layer deeper than what they may hear, be it in the media or from their friends. I want to push them to explore the issues and find out where the inconsistencies may lie.
If I were talking to my students, I might ask this: So…. can we really make the argument that stopping coal exports will stop climate change?
Ask difficult questions. The answers may surprise you.
Fred Thompson is a professor of public management and policy analysis and the director of the Center for Governance and Public Policy Research at Willamette University in Salem, Ore.