Despite policy efforts, natural gas slowly replacing coal
President Donald Trump focused much of his campaign speech on reviving the failing coal industry with deregulation and more jobs, but Derek Lemoine, an assistant professor of economics and UA Statistics-Graduate Interdisciplinary Program professor, said Trump’s rhetoric has a few issues.
“It’s not clear in this case what it means for a market to fail,” Lemoine said. “Markets can clear at a high price or a low price, a high quantity or a low quantity. What a lot of people have in mind is a decline in production of a certain source.”
As with any market shift, coal use is declining because use of another product is rising. According to Lemoine, that product is gas.
“The more coal you use for electricity, the less gas you need,” Lemoine said. “The more gas you use, the less coal you use. We’ve just gotten to the point where we’re using more gas than coal for electricity.”
Additionally, Lemoine said jobs have not been lost overall from the energy market; they’ve just shifted from coal country to gas country.
“It’s a bit of a geographic trade-off,” Lemoine said. “For every failing town in Appalachia, there is, to some level, a booming town in North Dakota. There’s a bit of a tension. If you really just care about jobs in the non-renewable sector, you can protect coal jobs, but the number one way to protect coal jobs is by taking away gas jobs.”
The pressure on coal comes mostly from the drop in both gas and renewable energy prices, Lemoine said.
“Where coal is getting squeezed is that both renewables and gas have gotten a lot cheaper right around the same time, so they both look pretty good compared to coal,” Lemoine said. “It starts to look like a better win for the private sector to switch away, which is what [we’ve] been seeing.”
Stanley Reynolds, a professor of economics, said Trump’s efforts to save coal won’t combat market trends in the long term.
“I believe his policies can probably improve the situation for the coal market and maybe save it a few jobs, maybe keep the industry going more than it would have if somebody else had been president,” Reynolds said. “But there have been market forces that have been reducing the demand for coal for some time, and I suspect they will continue. I’d be very surprised if there was a huge boom in the coal industry because of that.”
Another key piece of Trump’s rhetoric was deregulation of the market and the dismantling of some Obama-era policies. However, Lemoine said those steps likely won’t have too much of an effect.
“It’s an easy, simple story to say that Obama’s environmental regulations killed coal,” Lemoine said. “Certainly, environmental regulations never help coal, but most of those have not gone into effect yet and are probably at the margins when compared to the fact that gas just got a lot cheaper.”
Reynolds said the regulations Trump refers to are likely the EPA’s Clean Power Plan, which aims to reduce greenhouse gas emissions from the electric power sector. However, prior to the presidential election, that plan was slowed in court.
“President Trump and his EPA director have expressed a desire to try to undo that plan,” Reynolds said. “Whether that goes through or not, or whether they’re successful or not, that will make a difference. I would expect we’d see more emissions reductions in electric power if the EPA’s Clean Power Plan would go thorough and be upheld than if it was either knocked down by the courts or reversed through changes in EPA regulations.”
Lemoine said regardless of actual regulation, coal use is declining.
“The CO2 regulations, in the long run, could stop a resurgence of coal, but I think, to the extent that coal is shutting down now, it’s just because people expect more and more regulations in the future, and that’s where we’re going to end up,” Lemoine said.
Furthermore, Lemoine said even if Trump does ease regulations, it will not bring a coal boom to the mineral-rich Appalachian region. However, he said the market would still benefit from deregulation.
“It won’t hurt it,” Lemoine said. “It’s hard to say if it will be a big effect or a small effect. I don’t think it will be a huge effect. It’s not going to get it back to where it was 10 years ago. That would be highly unlikely, absent some collapse in the gas market.”
Don Gervasio, a chemical and environmental engineering research professor, agreed the effect of policy would not be huge.
“I don’t even know if Donald Trump has much to say about it, to be honest,” Gervasio said. “Most of the energy industry is really driven by industry. The government, every once in a while, tries to do things, but it’s mostly industry-driven.”
Gervasio, who has worked on energy technology for more than 30 years including solar, fuel cell and battery power, said the best way to think about an energy source is as a life cycle, considering the energy each approach provides from cradle to grave. He said when people don’t focus on the whole cycle, they get a distorted picture.
“Honestly, most presidents come and go and energy policy doesn’t change much,” Gervasio said. “The politicians tend to make talk; the industry makes energy. I doubt what Donald Trump does in his first 100 days will effect the energy scenario. And I don’t think anybody really knows what he’s going to do yet.”
Reynolds said the signals coming from the Trump administration are mixed, especially around the greenhouse gas-limiting Paris Agreement.
“On one hand, there’s a lot of talk about easing environmental regulations and getting the coal market back on its feet, but on the other hand, I’ve heard some concerns expressed from the administration about backing out of the Paris Agreement,” Reynolds said.
If the U.S. backs out of the accord, Reynolds said it might cause other countries to second-guess their own agreement and back off of some of their commitments.
“It matters what we do,” Reynolds said.
Overall, coal is declining not because of environmental regulations but due to the increase in gas usage, especially shale gas, and reviving the coal industry would take more than policies to succeed.