Tag Archives: Poland

Coal’s Hazy Future – 8/26/16

Coal’s future in the Western world is looking bleak, though the fossil fuel is going down fighting. To give some idea of what I mean, I summarize coal’s precarious situation in Germany, Poland, and the United States below.

Germany has been one of the most ardent supporters of climate change action, but even it still has trouble cutting CO2 emissions via policy. After backlash from labor unions and governments in coal regions, Berlin was forced to abandon a levy on the nations most carbon-intensive power generators and replace it with a subsidy of 1.6 billion euros to gradually eliminate eight coal-fired power plants by 2023. The environment minister was also forced to postpone establishing a coal phaseout plan until after national elections in 2017.

Resistance to levy illustrates the difficulty of reducing fossil fuel use when many workers and pensioners, local economies and communities still rely on them to pay the bills. The levy would have all but smothered the already low burning coal industry in Germany, so it unsurprising that it would face fierce resistance. It appears that it is only unions standing between the coal industry and further declines.

A more extreme example of coal finding political support is Poland. The Polish Law and Justice Party, after promising to preserve the country’s more than 100,000 coal mining jobs, is subsidizing coal as heavily as Germany once subsidized solar power.

Yet, even as the influential coal unions push the political party to deny permits for wind farms and prevent job cuts, it is clear that market forces are overwhelming their attempts to revitalize coal. Bloomberg data shows that profits in the Polish coal industry have fallen with the price of coal and, regardless of union strength, no industry losing money for years in a row can avoid job cuts forever.

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For now, the Polish Law and Justice Party is banking on a return to higher coal prices, but between international commitments to reduce emissions, the rise of American shale gas, falling renewable energy costs, and reduced demand from China, maybe they shouldn’t hold their breath.

American coal companies have already seen their value drop precipitously since the shale gas boom began forcing Peabody Energy, the world’s largest private-sector coal company, and others into bankruptcy.

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And unlike German and Polish coal miners who can use their powerful unions to fight off political threats, U.S. miners have next to no real political power. A weak voice on Capitol Hill has left U.S. coal susceptible not only to market forces like competition from natural gas, but also to increased regulatory burdens like the Clean Power Plan. Coal regions have been hit particularly hard in recent years; they’ve seen the loss of tens of thousands of jobs in the U.S. over the last decade alone.

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Future job cuts also seem unavoidable.

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The speed of coal’s decline illustrated in the EIA data shows that coal has lost and will continue to lose market share to natural gas regardless of who controls the White House and Congress.