EC HH Complacency Over Coal's Collapse: Factors To Consider

China's energy imports come mostly, however, from Siberia, Turkic Muslim Central Asia, or from Oceania, Africa, or most often the Middle East (by way of the Strait of Hormuz, the Indian Ocean, the Strait of Malacca, and South China Sea). Should these supply routes be imperilled, Chinese coastal cities could be forced to import energy across the Pacific from the Americas instead.

indian-ocean-bases

13 percent of China's oil imports comes from Angola, even, according to the US Energy Information Agency, more than from any country apart from Saudi Arabia (16 percent). Angola, apart from being a formerly war-torn country that remains full of material poverty and ethnic division, is located very far away from China, on the Atlantic rather than Indian Ocean coast of the African continent. For its oil to reach China, it must first round the southern tip of Africa, passing waterways controlled by Angola's regional rival South Africa.

india-map-coalreserves

A somewhat similar thing could happen, theoretically at least, in India, the world's third largest coal producer and fourth largest coal importer, where much of the country's oil and gas is produced or processed in states like Gujarat and Rajasthan while most of its coal is produced in Jharkhand, Chhattisgarh, and Odisha, states which account for two-thirds of India's coal reserves

India_map_Naxal_Left-wing_violence_or_activity_affected_districts_2013

There is a close overlap between India's Naxalite-Maoist insurgency and India's coal producing regions. The exception is Assam-Maghalaya region, but this region, which is connected to the rest of the country by a narrow land bridge between Bangladesh, Nepal, and Bhutan, has its own set of severe problems and insurgencies. Finally, you've got the Telangana-Andhra Pradesh complication.

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It may also become more economical to have solar power harnessed in the developing world more than or instead of in the developed world. This is because in the developing world, peak energy may increasingly occur at the same time as peak sunlight: in order to power air conditioning for billions of people when its 30-50+ degrees Celsius outside. In the developed world, in contrast, air conditioners are already widespread, and in many places peak energy use occurs when the sun is not bright, for example to power heating units in the winter, or to power perennially overcast places like Britain or Seattle, or to keep the lights on during super-long winter evenings in Scandinavia, or perhaps eventually to power electric cars overnight.

The developing world may also be increasingly likely to use airplanes more often than the developed world does. This is an important point, as airplanes arguably contribute to climate change  more than all the cars on the world's roads combined (at least, over a five-year timespan), since they emit lots of greenhouse gasses at high altitudes. Developing countries may need to use airplanes more because much of the developing world is located in areas where land-based transport can be difficult: in mountainous or hilly areas, in deserts, in the Tropics, in archipelagos, in rural areas, in conflict-prone areas, and in densely populated cities with terrible traffic jams.

The developed world, on the other hand, may even replace its own airplane usage with land-based transport in some cases, as a result of the technological advances occurring within the land-based transportation sector. Instead of flying from New York City to Florida, Sydney to Melbourne, or even London to Barcelona, people may take the train or bus instead (making use of the wi-fi on the train or the bus along the way, as well as the ability to use services like Uber and Zipcar to get around once they have arrived at their destination) or eventually even take a self-driving vehicle.

5. War

During World War Two, inter-continental weapons did not exist, so US shores were safe from attack (with a few exceptions). During the Cold War inter-continental weapons did exist, but the US was saved from attack by its massive deterrent of nuclear and conventional weapons.

Today, however, precision "smart-bombs" and precision cyber-weapons exist, putting the US at risk (in theory, at least) of a surprise attack on its military and industrial infrastructure. Because a large-scale precision attack would cause very few deaths by WW2 or Cold War standards - a factory could in some cases be destroyed overnight and kill only the night watchman, while cyber-weapons can disable an entire electricity grid without killing anyone - it could mean that an enemy country could be more willing to take the risk of launching such an attack. In other words, the technological advances that are making war less deadly may also end up making war more likely to occur.

The Pentagon is undoubtedly going to spend hundreds of billions or even trillions of dollars to defend against and prepare for such a possibility. It has already done this in recent decades with its ballistic missile defence systems; however these might be inadequate on their own, as North America could simply be too big a place to protect in its entirety.

As the precision-weapons era matures throughout the militaries of the world, the Pentagon may decide to take the additional step of shielding US industry by clustering a few "mega-industrial areas", capable of producing both military and essential non-military good,  that it can build more impenetrable defence shields around, . The idea will be that it is far easier to defend an area the size of a city than it is to defend an area the size of a continent. Other countries around the world may do a similar thing.

The question is, then, if these military-shielded mega-industrial areas do become a reality, will it be coal that powers them?

It seems quite plausible that it will be. The main alternative, natural gas, is difficult to transport by truck, and natural gas pipeline networks and gas production sites could be vulnerable in the event of war, as could be electricity grids. Coal, however, can be transported by truck, and much of the coal production in the US is already concentrated in just a single state in the heart of the country, Wyoming. Moreover, coal can be stockpiled in enormous quantities, whereas gas is very difficult to store in large quantities.

toptwo

Oil could conceivably be used instead of coal, but the US has few oil-fired power plants, and oil would be needed in large quantities to power the many military vehicles and fleet of trucks the US would need to fight a war, so it would not necessarily be available to use for electricity production.

Other countries too might use coal if they decide to build military-defended mega-industrial areas. Many significant countries in the world have coal mines or coal reserves, yet do not produce natural gas or oil in as significant quantities. These include Germany, India, England, Turkey, Poland, and China, for example. Moreover, countries can build up huge stockpiles of imported coal, which they cannot do with natural gas.

coal production .png

coal production by province

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A mega-industrial region of this kind, backed by the military, could perhaps also allow carbon capture and storage to finally become economically viable. Carbon capture and storage is a key component of mitigating global warming if fossil fuels are not going to be phased out, yet thus far it has been far from economical. But whereas it has not been achievable for a single power plant, if you cluster many power plants together in one area, it could maybe allow for the economy of scale necessary to make carbon capture more affordable.

If, finally, tensions between Russia and "the West" continue to deteriorate, or if the situation in Ukraine continues to destabilize, it might lead to Europe to have to turn to imports of energy from the Americas to make up for the natural gas and coal they would have to stop importing from Russia and Ukraine. This too could help to push up the price of US coal.

Conclusion 

I am just playing devil's advocate here, of course.  I don't actually have any idea what the future of the American or global coal industry will be. Still, judging by the fact that the Dow Jones US coal index has nearly tripled since the start of 2016 (though it still remains around 80 percent lower than it was as recently as mid-2014), I may not be the only one to be doing this.

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Comments

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Oil Baron 2 years ago Member's comment

Great read.

Dhaval Shanischara 2 years ago Member's comment

Does it actually surprise anyone that coal is crashing? With the advent of renewable resources, and climate change, coal inevitably was going to crash

Plunger 2 years ago Contributor's comment

Tons of data here, enjoyed the article, I wish there was a more conclusive strategy presented going forward.

As for myself, if we increase the tax on coal we must certainly penalize the more damaging methane by installing the "Fart Tax"

Dhaval Shanischara 2 years ago Member's comment

The "conclusive strategy" you discuss is the hardest thing to implement and formulate when considering climate change. The data and observable effects are there but since so much money is tied to converting to renewable resources, it may be very difficult, no matter how much coal crashes