Coal remains one of the world’s most abundant and affordable fuels, with 329 million tons produced in 2016. Coal is abundant, carbon-rich and easy to mine and process. These characteristics make it attractive to many countries looking to reduce emissions from their respective energy sectors. Coal is also a foundational element of the global energy system.
It produces approximately one-third of the world’s electricity and accounts for nearly 40% of global energy production. The United States is home to some of the world’s largest coal reserves, but it also has the highest per-capita energy consumption of any country in the world.
The United States is in the midst of a transformation in its energy sector. The country is slowly weaning itself off of coal while steadily increasing its use of natural gas and other renewable energy sources. However, the coal industry is being hit hard by the transformation. As demand for coal continues to decline, many coal companies are struggling to stay afloat. What happens to these companies when the demand for their product stops?
What is happening to the coal industry?
The United States is slowly weaning itself off of coal while steadily increasing its use of natural gas and other renewable energy sources. However, the coal industry is being hit hard by the transformation. As demand for coal continues to decline, many coal companies are struggling to stay afloat. What happens to these companies when the demand for their product stops?
Declines in consumption
Coal is used to generate approximately one-third of the world’s electricity, and about two-thirds of that is used in Asia. The United States, by contrast, uses only about 15% of coal to generate electricity. This means that the decline in the consumption of coal in the United States—the world’s largest consumer—is actually driving the decline in global coal consumption.
The price of coal has plummeted over the past decade, and it’s expected to fall even further. The price of coal in the US, for instance, was $2.90 per pound in 2001 and is expected to fall to around $1.90 per pound by 2021.
Coal is a fossil fuel, and as such, it has significant environmental concerns. Among these are carbon emissions, air and water pollution, and the destruction of habitats.
Some of the biggest declines in the consumption of coal are being seen in Asia, where increasing restrictions on energy use and the development of renewable energy sources have led to a decline in the demand for coal. Furthermore, in the United States, the use of coal to generate electricity is also in decline due to economic factors as well as environmental concerns.
In an effort to combat climate change and air and water pollution, various governments have sought to put restrictions on the use of coal. China, for instance, has implemented a string of policies designed to reduce the country’s greenhouse gas emissions. These have led to a decline in the demand for coal in that country.
The United States has also implemented policies designed to reduce air and water pollution. Among these is the Clean Air Act, which has made it costly and difficult to operate many coal-fired power plants.
Future of the coal industry
Despite the significant declines in the use of coal over the past decade, there are some indications that the future of the coal industry may not be as bleak as it appears. In 2004, the Energy Information Administration (EIA) projected that the US coal industry would decline by more than half over the next two decades. However, in the decade since, demand for coal has fallen by less than half, and the number of coal miners shrank by about a third.
EIA expects that the coal industry will grow modestly over the next few years. However, it also expects that most of this growth will be in the form of acquisitions, rather than new mines being opened. While this may suggest that the coal industry is being revitalized, it may also simply be that the surviving companies are being bought out by larger, more financially stable competitors.
The coal industry is being hit hard by the transformation. As demand for coal continues to decline, many coal companies are struggling to stay afloat. What happens to these companies when the demand for their product stops?
The answer, perhaps surprisingly, is that many coal companies are likely to survive and even thrive. This is because many countries have implemented policies designed to combat climate change and promote renewable energy sources. These include binding commitments under the Paris Agreement, as well as incentives such as generous subsidies for wind and solar power.
These policies, together with the declining cost of clean energy, mean that coal plants are being replaced with natural gas plants, wind turbines and solar panels. The resulting decline in the demand for coal is likely to force many coal companies to adapt and survive.