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Mr. Franz-Josef Schafhausen, former Director General Climate Change, European and International Affairs, Federal German Ministry of the Environment, Nature Conservation, Building and Nuclear Safety

Can coal miners save the Paris climate agreement?

12th April 2017 by CMIA

When President Trump made his campaign promise to pull out of the Paris climate agreement last year, it was pitched as a jobs-saving fix-all that would catalyze home-grown industries and help struggling coal miners get back to work.

First published on World Economic Forum website on 12 April 2017. Article by Mindy Lubber, President, Ceres

Coal miners quickly became a symbol of the administration’s “America First” policy and propping up the country’s most polluting power source became a priority. But now that assumption is being questioned by some of the very people he claimed to be protecting.

Major US coal companies, including Cloud Peak Energy and Peabody Energy, are now urging the Trump administration to reject any plans to pull out of the Paris Agreement, confounding assumptions about the government’s heartland supporters and the supposed benefits of withdrawal. The companies argue that by keeping a seat at the negotiating table, the case for supporting coal, including financial support for carbon capture and sequestration, can better be heard. Being on the outside means they will likely be impacted by future policies they had no input in shaping.

While there are no doubt certain US coal companies that would still like to see the US pull out of the Paris Agreement, this shows that support for such a move would be far from universal.

That’s because while many have been quick to blame the US coal industry’s decline on excess regulations, two of the chief causes have been a surge in cheap domestic natural gas production and increased renewable energy capacity, whose production costs are still plummeting. These two factors show no signs of reversing no matter what happens in Washington.

Last year, in fact, solar and wind energy accounted for nearly two thirds of new electric generating capacity added in the United States. Moreover, the Trump administration’s plans for easing fossil fuel regulations, which will further boost natural gas production, will likely have the opposite effect of harming coal’s competitiveness.

Increasing competition in the energy sector is something coal producers have been aware of for years. And it’s something Trump has potentially underestimated in his bid to bring back coal, as without fresh coal demand from utilities the economics of coal mining in the US are unlikely to improve.

A Reuters survey of 32 utilities, issued in the wake of Trump’s recent Energy Independence Executive Order aimed at dismantling the previous administration’s Clean Power Plan, showed the majority are still not planning to reverse their long-standing shift away from coal.

US power companies are expecting to retire or convert more than 8,000 megawatts (MWs) of coal-fired plants this year, following the closure of nearly 13,000 MW last year, according to US Energy Information Administration and Thomson Reuters data.

With little prospect of demand growth for US coal from utilities, there is scant incentive for the likes of Cloud Peak and Peabody to ramp up production, hire hundreds of workers and invest scarce capital.

US coal producers are still recovering from a bruising period in recent years, punctuated by layoffs, mine closures and bankruptcies by giants like Arch Coal, Peabody and Alpha Natural Resources. Because of this, many are loath to open new mines and bring people back, although a few lesser-known companies are doing so.

And considering one of the real drivers behind job losses in coal is the surge in cheap US natural gas production from hydraulic fracturing, it’s tough to see how easing regulations for all of the country’s fossil fuel industry could boost the competitiveness of coal alone.

The prospects for US coal producers to increase exports, particularly to Asia, could prove more promising than the domestic market. Both China and India, however, are moving away from coal more quickly than many expected. They’re also strengthening their embrace of renewable energy. Added together, the risks of investing fresh capital to chase volatile overseas coal markets will likely mean companies and their investors will remain hesitant.

So while the need to get laid-off coal miners back to work remains pressing, it is clear that withdrawal from the Paris Agreement will not help that cause, and if anything could hinder it.

Paradoxically, while natural allies of Trump’s plan – such as coal companies – are questioning the move, a small number of environmental voices are starting to doubt the benefits of having the US part of the global accord.

Johan Rockström, director of the Stockholm Resilience Center at Stockholm University, claims that the US could undermine the ambition of the Paris Agreement if the country remains, and without it progress could be more effective. One troubling scenario to consider, for example, is the US remaining in Paris and pushing for delays in the transition from high carbon to clean energy resources, an outcome some coal interests would eagerly support. However, most other climate leaders, such as Christiana Figueres, a key architect of the agreement, are quick to point out larger overall risks of losing one of the world’s largest emitting countries.

Meanwhile, the number of businesses urging continued US participation in the Paris Agreement continues to grow. Since President Trump’s election victory, more than 1,000 companies and investors have publicly signed the Business Backs Low-Carbon USA statement, underlining the view that the agreement provides the long-term strategic direction that businesses need to better tackle climate change. These same companies have also been vocal in calling for strong low-carbon policies, like the Clean Power Plan, and dozens were critical of the President’s recent announcement aimed at scuttling it.

Ultimately, the Trump administration’s efforts ignore the irresistible and irreversible clean energy economy that is already underway, creating hundreds of thousands of new jobs and economic vitality in communities across the country.