Deregulation won’t save coal: market forces — not regulations — killed it, which is why Wyoming must diversify its economy, a visiting speaker told an audience Friday at the University of Wyoming.
Trevor Houser, a partner and researcher at the Rhodium Group, presented his research on the future of the U.S. coal industry to a group of students, professors and community members during an event in the Energy Innovation Center. Behind him, slide after slide displayed the decline of coal generation and consumption in the U.S.
Rhodium Group conducts economic research with a focus on China and India, how those countries affect international energy markets and the effects of policy decisions and climate change on those markets.
Houser came to UW to preview results from a research project conducted in partnership with Columbia University’s Center on Global Energy Policy.
Houser said the coal industry has been hurt by the rising preference and demand for alternative energy sources, such as nuclear, renewable and natural gas.
“Natural gas has played the largest exclusive role,” he said.
Throughout the timeframe of this decline, the Obama administration implemented or proposed a number of environmental regulations aimed at reducing carbon dioxide emissions. In theory, these regulations make coal costlier to produce and therefore less able to compete with natural gas or other energy sources.
But Houser’s research found damage wrought by these regulations on the coal industry were a drop in the bucket compared to damage done by market forces.
“Our estimate is that, at most, those regulations reduced coal consumption by about 4 percent,” he said.
“So, we’ve had a 30 percent decline, maybe 4 percent of that was due (to regulations.”
Marco Polo, a graduate student in international studies major, said Friday’s discussion of market forces gave him a new perspective.
“It was very useful because it opened my eyes to the more economic side of it and the supply and demand issue with coal,” he said.
According to Houser’s research, Wyoming’s troubles actually stem from China’s rapid decline in demand in the past several years. Between 2002-2011, the U.S. coal industry received a boost from rapid urbanization in China — a change that made China very energy-intensive as it sought to construct buildings and infrastructure. Now that this period of rapid urbanization has ended, China is shifting its focus to the service industry, which is much less energy-intensive than construction and infrastructure-building.
This change in demand from overseas importers had a dramatic impact on the domestic coal industry.
“If you add that up and look at the past four years, more than 50 percent of the decline in revenue for U.S. coal producers has been due to non-U.S. factors,” Houser said.
Bleak as his outlook was, Houser said the situation with coal presented an opportunity for Wyoming. He said Wyomingites find it difficult to discuss the future of coal because those discussions are always politically charged. He said any talk of diversification is like waving a “white flag” in the war on coal.
“The war on coal is now officially over,” Houser said. “So, it opens up space for people to have a real conversation about the outlook (for coal) and … sustainable economic development strategy in Wyoming and coal-producing communities around the country.”
Houser added this diversification can only happen if Wyoming acts soon, taking advantage of a presidential administration that emphasizes infrastructure while also encouraging tech and manufacturing firms to set up shop in Wyoming.
“What it requires is a focus on attracting those industries, creating political space to have a conversation about it and trying to get the federal government to be an active partner,” he said.