Environmental Impacts of Coal Mining & Utilization: A Complete Revision of Environmental Implications of Expanded Coal Utilization

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Coal in the International Energy Scene

Publisher Summary

This chapter provides an overview of coal in the international energy scene. Growing internationalization of coal will make it a more dependable source of energy with less reliance on a limited number of suppliers. Although coal deposits are regionally dispersed, an increasing concentration of control over production and trade may occur. A significant growth of trade will give rise to financing requirements equivalent to about 4% of overall investment requirements in Organization for Economic Co-operation and Development (OECD) countries. This can continue over a period of two decades or more, but sudden surges in financing requirements will compete with other industrial investment needs through increases in interest rates. In developing countries, financing problems are likely to be the most severe; therefore, emphasis will continue to be on private investment in export projects. Concentration of control will be encouraged by the more complex and coordinated planning required in international trade, including expertise in marketing, finance, transportation and, in particular, by the need to reduce the risks inherent in long-term coal infrastructure projects.

1 Introduction

2 Resources and Reserves

3 Energy Use and Economic Growth

4 Coal Demand

4.1 Energy Prices and Interfuel Substitution

4.2 Coal and Electricity Generation

4.3 Other Industrial Markets

4.4 Coal Conversion

5 Coal Supply

5.1 Production and Costs

5.2 Developing Regions

5.3 Transportation

6 Coal Trade

6.1 Current Trade Requirements

6.2 Outlook

7 Institutional Developments

8 References

1 Introduction

The utilization of coal as an energy source, both by means of the steam engine and in the form of coke, was a major characteristic of the first Industrial Revolution. It was on coal that nations built their industrial power in the nineteenth and early twentieth centuries. As early as 1860, Great Britain was producing over 80 million tons of pit coal, and it is probably not an exaggeration to say that, with the control of the oceans and overseas dominions, coal made her the dominant industrial power for several decades. Until the First World War it was the main coal-producing nations that held the world’s key positions. In 1913 Great Britain, Germany, France and the USA between them produced almost 90 % of the coal extracted in the whole world, and this production accounted for virtually all the world’s energy supply. Throughout previous decades a 3 % annual growth rate bore witness to the vigour of the industrial boom. Oil, however, was beginning to appear on the American market, and its use as a fuel was inconspicuously preparing the way for what was later to be one of the great mutations of the energy market.

Subsequently, the world entered a long period of disorder and trouble. There were two World Wars, an unprecedented energy crisis, and a massive invasion of oil into the energy market of the United States, which became the leading producer and exporter. The result of this shift to oil was a reduction in the share of coal in the world’s commercial energy consumption from 61 % in 1950 to 51 % in 1960 and 35 % in 1970. The major transition took place in the mid-1960s. By 1967 oil had overtaken coal’s global market share. This pattern was not uniform throughout the world; in the USSR rapid industrial expansion continued to be founded on coal.

After the Second World War oil production began to develop mainly outside the industrialized world–in Latin America, the Middle East, and later in Africa. The USA became, like Western Europe, an energy importer. A new balance in the world energy market came into existence based on the transfer of the developing countries’ excess production to the deficient markets of the industrialized nations and by 1970 coal accounted for about 35% of the world’s total commercial energy consumption (UN, 1978).

There was an exceptionally rapid and regular growth in the wealth of both the CMEA (Council for Mutual Economic Assistance) and the OECD (Organization for Economic Co-operation and Development) countries. World energy requirements increased with this rapid economic progress at about 4 % per year in the 1950s and 1960s, but total coal production increased only 2 % per year over this period. Solid fuels now account for no more than 30% of the total world energy supply and only 21 % in Western Europe (AGIP, 1980). The leading role on the developing world energy scene was played by liquid hydrocarbons, with new discoveries being made and decreasing prices mirroring the abundance of supplies.

If this history of global primary energy substitution between 1860 and 1975 were used to project market shares into the future, coal would be credited with only 10% by the turn of the century (McDonald, 1981), but something of a crisis arose in the early to mid-1970s. Between 1973 and 1979 the market price of oil rose, in real terms, several-fold, producing a severe challenge to the energy balance which had prevailed for 20 years. Thus intense interest came to be expressed in forms of energy which could act as a substitute for petroleum. The large and diversified resource base of coal, as well as its relative cheapness in relation to other fuels, led to a belief in the return of coal following its postwar decline (IEA, 1978; Wilson, 1980; World Bank, 1979). A period of gradual reversion following its partial replacement by oil was expected.

These predictions of a rapid rise in coal demand have more recently been affected by industrial recession in Western countries and by increased conservation of energy. Industrial restructuring has suggested that a previously supposed link between economic growth and energy use was unfounded (Pindyck, 1979). Future trends in coal production, consumption and trade cannot be predicted accurately and extreme difficulties exist in distinguishing between temporary effects on the international energy scene and those which will result in long-term changes (Long, 1982; Prior, 1982). Coal has now been established as a relatively attractive fuel in many industrial applications, but its overall prospects will depend on economic growth in the major industrialized regions of the world and its acceptability from a social and management point of view. The timing, rate and extent of the introduction of new coal conversion technologies have become particularly uncertain because of trends in relative energy prices and industrial recession.

However, one important change which is occurring, and which will continue in future, is a growing volume of international trade in thermal coal (Long, 1982). But institutions which developed in association with more confined and regionally based coal production and utilization will become increasingly inadequate to deal with the more complex trading and financial arrangements. These inadequacies will also apply to the provision of necessary, long-term co-ordination to coal-related infrastructure projects which take many years to complete. The risks inherent in developing the necessary infrastructure are aggravated by an uncertain economic climate, a factor which itself could inhibit a reintroduction of coal (Fischer, 1984).

2 Resources and Reserves

A major difficulty in assessing coal resources and reserves on a worldwide basis is the lack of an internationally accepted and comprehensive system of resource classification. Concepts and classification systems which apply to mineral resources in general are discussed by Schanz (1975), Modelevsky, Safronov and Egel (1979) and Fettweis (1979a). Difficulties in the formulation of satisfactory classification systems are discussed by van Resenburg (1982); estimates are required in order to determine whether coal production and utilization within a specified time is likely to become constrained. This depends on the geological and technical factors which affect coal supply and those factors which determine demand for coal; for instance, the demand for products of industries which consume coal, the cost of developing transportation and other infrastructure required for coal utilization and the supply costs of other fuels. Controlling factors also include the social acceptability of coal use and legal constraints. Nordhaus (1978) considered the interaction between geological constraints and economic needs and used a model of resource exhaustion to estimate efficient rates of extraction for coal, petroleum and natural gas. The approach is reviewed and contrasted with other world energy models by Ulph (1980).

In a joint agreement adopted in 1973 between the United States Geological Survey and the United States Bureau of Mines (US Department of the Interior, 1976a, 1976b), coal resources are classified on the basis of two independent parameters: known geological status and economic recoverability. This is illustrated in the McKelvey diagram shown in Fig. 1.1. The United Nations’s classification is similar, but uses a different system of terminology (UN, 1979; Fettweis, 1979b). Resources are defined in the agreement as concentrations of coal in such a form that economic extraction is currently or may become feasible. The appropriate time horizon for assessing economically feasible extraction is not clear, and different and often vague conventions are applied. In Canada the period is about 25 years (Department of Energy, Mines and Resources, 1975); some Soviet publications mention 100 years (Kusnetzov et al., 1971); the World Energy Conferences of 1974 and 1980 (WEC, 1974, 1980) refer to the foreseeable future; and the World Energy Conferences of 1977/78 (WEC, 1978b) refer to "some time in the