Coal Makes A Comeback

In recent years, policymakers have put their faith in the shale gas revolution, which is supposed to create a whole host of benefits, which include bringing manufacturing back to the United States, reviving rust belt communities, and providing alternative fuels for transportation.

One of the key selling points, however, is that natural gas will help America meet its climate commitments by dramatically reducing greenhouse gases. Natural gas emits about half of the greenhouse gas emissions as coal, so a shift from coal-fired power plants to natural gas, the thinking goes, would make significant progress toward meeting our climate challenges.

This argument was politically potent because it disarmed and divided climate hawks and provided political cover for inaction. After all, if the market was solving our climate problem, and the natural gas industry was the hero leading the way, then there was little to do but sit back and wait for cleaner days to arrive.

The Energy Information Administration (EIA) recently released data that puts the lie to that thinking. EIA’s data show that coal is recapturing some of the market share it lost over the last two years. In the spring of 2012, coal and natural gas generated roughly the same proportion of electricity in the United States, both accounting for 32 percent of the total. This was a dramatic shift, as coal historically made up half of the electric power sector, dating back decades. Greenhouse gas emissions dropped as utilities switched to natural gas, and politicians celebrated.

Now, coal has regained some lost ground, surging this year to 40 percent of the total. Why has this happened? The answer is that natural gas prices have rebounded from historic lows. In 2012, natural gas prices dropped under $2 per million Btu (MMBtu), which made it unprofitable for companies to continue to drill. Some drilling rigs shifted to oil, which is more lucrative. The low prices were unsustainable as a result, and this year they have jumped to over $4/MMBtu, double what they were a year ago. With higher natural gas prices, coal has made a comeback.

It is also important to note that the benefit of natural gas over coal may not be as big as is commonly believed. Methane, a greenhouse gas over 20 times as potent as carbon dioxide, can escape during the drilling process. It may be that methane is escaping at such a rate that it outweighs the lower carbon dioxide profile that natural gas has over coal – but the data is yet unclear.

The lesson from this trend is that the climate gains were never locked in and emissions reductions were temporary. There have been several policy initiatives in recent years that have made tangible progress in reducing greenhouse gas emissions – fuel economy standards for the nation’s auto fleet, and state renewable portfolio standards are two of the most notable examples. Renewable energy has also made significant strides recently in reducing costs (also due to policy), but much more is needed.

Instead, the Obama administration has thus far deferred action. It even decided to indefinitely delay a rule that was scheduled to be finalized this spring that would have placed limits on greenhouse gases from new power plants. Obama’s campaign arm, Organizing for America, has been slow to build support for any environmental issues, even though it has been quite active in pushing the President’s agenda on other policy fronts. OFA has signaled that this will change soon, but environmentalists have expressed anger at what appears to be the President dragging his feet.

What is clear is that significant action is needed to reduce greenhouse gas emissions, and relying on another fossil fuel – natural gas – is not the solution.