One of the reasons President Trump chose to pull out of the Paris Agreement last week is because he wants to bring back a shrinking coal industry in the United States.
But is the coal mining business drying up because of over-regulation, or because of cheaper, cleaner competition? Although there is a push toward “clean coal,” which is a bit more environmentally friendly than its standard counterpart, regulations are really not the culprit.
A recent Columbia University study found that regulations accounted for only 3.5 percent of coal’s decline, while competition from natural gas accounted for around 49 percent.
The fracking boom has made natural gas so cheap and abundant that there’s no way coal can compete with it.
And natural gas prices are on a steady downward trend. Prices have declined by more than half since February of 2014, and have gone down more than 18 percent from January to June of 2017.
“Clean coal is fiction in a low natural gas price world,” Michael Roomberg, portfolio manager of the Drill Bit to Burner Tip Fund natural gas mutual fund, told CNN Money.
Although mines are beginning to open—including a new one for metallurgical (“met”) coal in Jennerstown, Pennsylvania—experts argue that these mine openings are not going to reverse the overall decline of the coal mining industry.
Met coal is much more expensive than regular “steam” coal, which is used to generate electricity, so mines are opening up to take advantage of those high prices for met coal.
James Stevenson, director of the coal team at IHS Markit, told NPR that the metallurgical coal boom has helped the coal industry rebound. However, the industry isn’t going to go back to its “glory days,” regardless of Trump’s pro-coal policies.
“The direction is downward,” Stevenson said. “There’s not a whole lot a government can do to change economics, so we don’t really expect a whole lot of change to the coal demand outlook. Most analysts would agree [Trump’s pro-coal policies] are probably a case of slowing the decline [rather than generating] any real upside.”
Coal industry analysts say the coal industry will pick up a bit, but not to the levels seen at its height in 2011. The reason: Coal isn’t being used for electricity generation nearly as much.
“Natural gas is the big reason why coal use for electric power has declined,” said Jay Apt, a professor of engineering and public policy at Carnegie Mellon University. In addition to cost, environmental concerns were a big reason why many electric utilities made the switch from coal. In fact, natural gas recently overtook coal as the largest source of electricity in the country.
Ultimately, while Trump’s efforts to deregulate the coal industry may result in a small uptick, it’s really not going to make much of a difference in the face of steadily declining natural gas prices.
