HomeIndustry SectorsGenerationHeadwinds and tailwinds for coal in N & S America

Headwinds and tailwinds for coal in N & S America

3 April 2012 – Industry intelligence group GBI Research suggests that South and Central America’s heavily export-oriented coal mining industry may suffer as destination countries move their energy preferences away from environmentally harmful sources.

A new report by GBI found that South and Central American coal exports may decline in the future due to  environmental  regulations being set up by major importers US and Europe that discourage the use of coal-fired power plants.

While South and Central America produce modest amounts of coal – production was estimated at 109.9 million tonnes in 2011 accounting for just 2% of total global coal production – the region exported around 87 million tonnes, highlighting coal’s significance as a source of revenue for the region.

However, strict regulations passed by the United States Environmental Protection Agency (USEPA), which aim to reduce carbon emissions by 2014, are anticipated to damage the revenue gained by South and Central America through coal exports. Similarly, the EU directive on renewable energies in Europe requires each EU member state to increase its share of renewable energies in their total energy mix to 16% by 2020. At the same time, many European nations are planning to shut down half of their coal-fired power plants, and thereby reduce greenhouse gas emissions (GHG) by 80% to 95% from 1990 levels, by 2050.

In light of these developments, coal production in the region is anticipated to experience slower-than-expected growth. However, due to a rapidly expanding industrial sector, regional coal production is expected to grow at a compound annual growth rate (CAGR) of 5.4% during the next eight years to reach 177.8 million tonnes by 2020.

At the same time another GBI report suggests that conflicting public fears surrounding nuclear disaster and environmental destruction will fight it out to decide the fate of the coal mining industry within North America.

That report shows coal consumption in North America is anticipated to remain strong in the future, despite campaigns and government legislation which seeks to lower fossil fuel usage and carbon footprints.

North America is one of the largest coal producing regions in the world. The major coal-producing mines in the region are all located in the United States, within the Appalachian coal region, the Interior coal region and the Western coal region, which includes the Powder River Basin. Canada also has a significant number of smaller coal-producing mines in the provinces of Alberta and British Columbia.

Power generation accounted for around 90% of total coal consumption in North America during 2011, highlighting the importance of coal in the region. The recent Fukushima disaster saw nuclear energy threatened in the wake of a tsunami on the Japanese coast, and nations around the world have altered their perceptions on power sources accordingly. Many have become wary of nuclear energy, with countries such as Germany abandoning this method of power generation entirely, all the while creating support for coal power generation.

Nonetheless, the opposition against greenhouse gas emissions from end-use industries cannot be overlooked. Fossil fuels are widely lauded as environmentally damaging, and various government plans to reduce national carbon footprints may directly oppose the use of coal as a method of generating power.

North America produced approximately 1,027 million tonnes of coal during 2011, accounting for around 14.1% of total global coal production. During the same year, power generation accounted for 910.3 million tonnes, or 93% of total coal consumption in North America.

Coal-fired power plants both within and outside the region will drive demand over the decade. The consumption of coal in North America is expected to grow to 940.4 million tonnes over the next eight years, largely the result of increased demand from several planned and upcoming US coal-fired power plants due for completion by 2015, which will bring in a combined capacity addition of 11.5 GW.