Irony of Ironies: Europe Switches to Coal as US Gas Glut Reduces Emissions
Here’s a tester for you. Which raft of energy policies gets proven ‘greener’ results? Is it the anti-fossil fuel, cap-and-trade regulatory regimes of socialist Europe? Or is it the path of technological innovation set by the ‘evil’ capitalists in the Kyoto-eschewing Bush White House?
In what has to be the irony of ironies, Europe’s consumption of coal grew by 3.3 percent in 2011. The increase was directly due to the glut of European Trading Scheme (ETS) emission allowances which made coal the most profitable electric power fuel. Over in the United States in 2012, however, coal burning to generate power continued to decline, primarily due to America’s switch to shale gas. Natural gas emits around half the CO2 of coal. U.S. levels of carbon emission are currently plummeting; a feat Europe has no chance of matching, not least as coal use is on the increase. It’s a situation that ought to bring the whole raft of EU market-interfering policies geared to reducing carbon emissions into sharper focus. Policies that can only be characterize by three S’s: sheer synchronized stupidity.
Not that the U.S. coal industry is suffering from the domestic switch to gas, you understand. America’s high-quality coal has had no trouble finding an alternative and lucrative market: Europe. And U.S. coal exports to Europe are only set to increase further.
Far from moving away from burning ‘dirty’ coal, global consumption is rising. According to the BP Statistical Review of World Energy released in mid-June, global energy consumption grew by 2.5 percent in 201l in line with long-term trends. However, global coal production also increased last year by almost half a billion tonnes. That’s exceptional. It represents a 6 percent increase in a single year and tops an annual average growth rate of 4.6 percent a year over the last decade. In short, King Coal almost edged out oil as the world’s leading energy resource in 201l hitting 30 percent of global energy consumption. And it is set to surpass (and probably already has) oil as the world’s most important commodity in 2012.
In stark contrast to the U.S., Europe’s use of natural gas fell last year by 2.1 percent as gas-fired plants that needed only half the number of carbon permits, became increasingly uncompetitive. Prices fell sharply by 17 percent to just 8 euros a tonne. Indeed, so expensive has gas become in Europe that the major players like EON and RWE are considering shutting down their gas-fired plants entirely by 2015. Coal – the literal b^ete noire for all green politicos – is the only viable alternative.
The Eurocracy did not plan it to be this way.
You might think that European capitals would be falling over themselves to develop Europe’s own shale gas resources and share in the ‘green’ benefits of switching from burning coal; not least because another key EU energy policy is to diversify away from European dependence on Russian gas imports. But the EU-imposed goals of CO2 targets for 2020 dictate that member states must bend the knee to the green lobbies that demand a ban on hydraulic fracturing (“fracking”), the technique singly responsible for the U.S. gas and oil revolutions. In effect, an EU-sponsored lose-lose situation has developed.
Europe can only look with dismay across the Atlantic at how U.S. carbon levels are falling as a direct consequence of the switch to natural gas. Just for good measure, shale gas developments have already cut the cost of U.S. electricity generation by 15 percent and halved domestic gas prices. On top of that, according to the U.S. Energy Information Agency (EIA), America’s energy-related carbon emissions fell by around 7.5 percent during the first quarter of 2012. U.S. carbon emissions are now approximately 8.5 percent lower than for the first quarter of 2010. This year’s total emissions are predicted to be on course to fall back to 1990 levels. The reason is plain enough. At the beginning of the new millennia, coal-burning accounted for 52 percent of U.S. electricity generation. By 2008 that had fallen to 48 percent. In April this year, the use of natural gas (mostly from shale) and coal-burning in electricity generation were neck and neck at around 32 percent each.
By any measure, the U.S. carbon-lowering story is a striking one.
But there’s a much more basic economic lesson here for those able to remove their green-tinted ideological glasses. Eurocrat socialism, with its predilection for imposing regulatory cap-and-trade restrictions that inherently render industry less globally competitive, has contrived to achieve the very opposite of its chief goal: a new, high carbon-emitting, coal boom. American capitalism, on the other hand, has not only seen technological innovation (fracking) promote a cheaper energy revolution and reduce dependence on foreign energy imports it has also raised the very real prospect of energy independence. Just to rub salt in fast-developing European ‘green’ wounds, the U.S. way of ‘doing green’ is making EU energy policies look UP (unfit for purpose).
As the irony of Europe’s electricity increasingly set to be generated courtesy of U.S. coal sinks in (sending carbon goals up in smoke), Eurocrats should realise there is one marketplace regulation over which bureaucratic meddling has no competence: the Law of Unintended Consequences. So if the ignominy inherent in European power being generated by American coal should become too great for bureaucratic EU sensibilities, I could suggest an alternative fuel source could include bundles of failed and discredited strategic policies.
The Kyoto Protocol, for instance.