Can little old Washington influence the price of coal to China?

True, China can shop in other places for coal for its power plants, if Washington denies a coal port in Bellingham. But if we make the price of reliable coal cheaper, China will want to buy more and more coal and build more and more coal-fired plants.

Crosscut archive image.

A coal-powered generating plant in China.

True, China can shop in other places for coal for its power plants, if Washington denies a coal port in Bellingham. But if we make the price of reliable coal cheaper, China will want to buy more and more coal and build more and more coal-fired plants.

In June, I wrote an article in which I suggested that "[b]locking construction of a port at Cherry Point, or Longview, or any place else in the Pacific Northwest won't reduce by even one lump the amount of coal burned in Chinese or Indian power plants. There's plenty of coal in the world. It can reach Asian power plants in many ways."

I also quoted the federal Energy Information Administration's statement that "some analysts have viewed the sharp increase in U.S. exports as an indication of the growing importance of the United States as a world coal supplier. There has also been speculation that China's growing demand for coal will support this trend in the future. However, U.S. coal is a relatively high-cost supply source when shipped to Asian markets, and in the long term U.S. coal will be competing in the Chinese market with lower cost suppliers, notably Australia and Indonesia among others. . . . [T]he United States remains a marginal coal supplier over the long term, responding to short-term disruptions or spikes in demand rather than significantly expanding its market share of world coal trade."

I soon received an irate email from an environmental attorney, who told me I was making the same arguments the coal companies made and said that the anti-coal forces were about to release an economic white paper that argued just the opposite, that a coal port in western Washington would in fact lead. to more coal burning and more greenhouse gas emissions.

Last month, Sightline Institute released the white paper on The Greenhouse Gas Impact of Exporting Coal from the West Coast by University of Montana emeritus professor of economics Thomas M. Power.

Power doesn't dispute the fact that China will get all the coal it wants, whether Powder River Basin coal is shipped through a Washington port or not. No one disputes that. But he argues that if Powder River Basin coal is shipped through one or more Washington ports, China will want more.

It's basic supply and demand, Power says. China not only sells cheap stuff. Like everyone else, Chinese decision-makers buy cheap stuff, too. The cheaper coal becomes, relative to other sources of energy, the more they'll want to buy. Price will drive energy policy and, perhaps more importantly, investments in energy infrastructure. If Chinese decision-makers foresee a reliable supply of cheap coal, they'll invest in more coal infrastructure to meet their nation's growing energy demand, which will guarantee more coal burning than would otherwise take place into at least mid-century.

Some people have "simply wrung their hands and said there are lots of sources of coal supply," Power said when I spoke with him on the phone. They have said "'it just doesn't matter." But "that's just not correct," Power said; "it matters."

Of course, China can buy coal from Indonesia, from Australia, Russia, Mongolia. It can get coal shipped through British Columbia or the Gulf of Mexico. It can get coal from Alaska. It can even burn more coal from its own inefficient mines. But the more different places compete for the China market, the more they will be forced to cut prices, and the more attractive their products will become. Adding a major port aimed at the east Asian market would also help drive down the price.

And it wouldn't simply be a matter of sticker price. Power explains that the larger the number of shippers, the lower the risk that natural disaster, war, or mechanical failure will disrupt supply — and the lower the risk that a single shipper or group of shippers will jack up the price. If you're talking about a nation's energy supply, reliability is a key virtue, and the more redundancy you build into the supply system, the more reliable it's likely to be. Adding a Washington port would make imported coal a more reliable energy source, as well as a cheaper one.

"The conclusion I draw . . . is that the PRB coal exports facilitated by the proposed coal ports will reduce the price of coal to Asian markets, the cost of using coal there, and the long-term price and supply risks that planners take into account when making long-term energy infrastructure investment decisions," Power writes in the white paper. "Coal export will encourage the continued, rapid expansion of coal-fired electric generation capacity. Consequently . . . the impacts of coal export will be much larger than the annual capacity of the port facilities would suggest, because it will encourage investments in new coal-burning facilities in Asia and their associated 30-50 year combustion of coal. "

While the white paper explains in principle how a Washington coal port would affect China, it doesn't quantify anything — not the impact on price, not impact of price on Chinese investment. Power readily concedes this. "We've just laid out the analysis that had to be done," he told me. "Now, we're doing it." He's working on a second paper that will quantify things. A draft should be ready by mid-October.

There are probably too many variables to answer any of this definitively. The white paper points out that in the United States, the price of environmental regulation drives the overall cost of coal power much more than the price of raw materials does. (The absence of regulation has an influence, too. A big U.S. utility recently abandoned plans to move beyond the experimental stage of the nation's largest carbon sequestration effort because Congress hadn't enacted a strong anti-climate-change policy, and state regulators wouldn't let the utility pass the cost of sequestration on to ratepayers.)

Policy decisions, in addition to economics, may also shape the market for coal in China, and decisions made in supplier nations may affect the price.If Chinese development of high-speed passenger rail frees up more capacity on freight lines, might that affect the ease and cost of delivering coal from western China? Power doesn't think China is going to move a lot of coal by rail. He points out that "building high-speed rail . . . to free up the use of existing rail lines . . . is not a low-cost solution" and suggests that even with the high-speed rail in place, Shanghai and the other centers of southeastern China will continue getting coal through its ports; he figures that those existing port facilities will "continue to be used to get the cheapest coal."

Isn't it a bit quixotic for Washington to tackle global climate on its own, to say "no" to its own local fragment of an international trade that embraces ports in other states and provinces, and indeed on several continents? Power doesn't think so. Of course, he writes, "[i]n discussions of greenhouse gas emissions policy, it is regularly pointed out that if a particular local, state, or national government acts on its own to reduce its emissions, the impact on global climate will be insignificantly small since it is total emissions around the world that matter. The costs associated with a government unilaterally acting to reduce its emissions, however, may well not be small, especially when projected foregone economic activity is taken into consideration. . . . From a narrow economic rationality perspective, it is in any individual government’s interest to 'free ride' on the efforts of others and continue to take maximum advantage of the common property resource, the earth’s atmosphere, for waste disposal purposes."

Basically, he argues that if nobody takes the first step, we'll all stay stuck right where we are. He doesn't deny that ultimately, national policy will be crucial. But he argues that state action will drive national policy. Look at how California has led the way on vehicle and appliance efficiency. Look at how Massachusetts health care reform — enacted under then-governor Mitt Romney — influenced the final shape of Obamacare.

Power also argues that it's time for Washington — with its progressive climate change policies — to put its money where its mouth is. The state may feel good about this year's legislative decision to shut down the Centralia coal plant, he says, but it will be "no skin off Washington's nose to shut down Centralia." In contrast, "now jobs in Washington are being waved in front of the state and profits to be made in Washington . . . and now the question is 'how is Washington going to respond?'"


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About the Authors & Contributors

Daniel Jack Chasan

Daniel Jack Chasan

Daniel Jack Chasan is an author, attorney, and writer of many articles about Northwest environmental issues.