Energy Investing: Consider the Possibility of Cleaner Coal - dummies

Energy Investing: Consider the Possibility of Cleaner Coal

By Nick Hodge, Jeff Siegel, Christian DeHaemer, Keith Kohl

As an energy investor you should know that coal-burning power plants are on the wane in the United States. New legislation means that older plants will close, and some of the more modern ones will be further enhanced to reduce emissions. The trend is clear in the developed world. And it’s anti-coal.

What is clean coal?

When people talk of clean coal, they mean coal that’s processed to remove pollutants created when it is burned. This trend is being driven by a global technological drive to reduce carbon dioxide emissions. Coal burning is the leading cause of carbon dioxide being released into the atmosphere.

Coal and the greenhouse effect

Carbon dioxide is a greenhouse gas, in that it floats into the higher atmosphere and acts like the glass in a greenhouse, trapping heat from the sun. Scientists believe this trapping of heat, known as the greenhouse effect, causes climate change, melting of the polar icecaps, rising ocean waters, increased storms, and the desertification of farmlands. Thus, environmentalists are making a concerted effort to cut down or eliminate coal-burning power plants.

Will clean coal ever become a reality?

Coal advocates believe that coal has a future in the United States. They look to new technology that will sequester, scrub, or otherwise limit CO2 discharge and the other toxins released from burning coal.

Former president George W. Bush pushed heavily for clean coal, beginning in his first term in office. He believed that such technology could limit U.S. dependence on foreign oil. In his second term, Bush funneled $3.4 billion in Troubled Asset Relief Program (TARP) money to clean coal efforts that advanced the field of study.

Coal will never be completely clean. Vaclav Smil, an environmental professor at the University of Manitoba, Canada, says that there’s no economically feasible way to eliminate the carbon dioxide emissions from coal-fired power plants. If one were to bury just 10 percent of CO2 put out annually by the global coal-burning industry, it would equal the volume of oil produced every year.

The money required would be in the trillions of dollars. There’s no easy answer to so-called greenhouse gas emissions. As a coal industry investor, you should know that environmentalists will never be on your side.

What if coal burning ends in the U.S.?

Environmental groups such as Greenpeace want to eliminate coal burning altogether. They claim that burning coal emits 29 percent more CO2 than other hydrocarbons like oil or natural gas. And coal emits a toxic mix of mercury and other waste products that get into the food chain. It should be noted that no fiscally feasible methods are currently available to remove this mercury with clean coal technology.

The other side claims that if coal isn’t burned in the United States, it will be burned with no scrubbing technology in Asia. Furthermore, the United States won’t suddenly shut down 50 percent of its electricity production. Nor is it likely that the United States will let 500 years of coal reserves go to waste.

The environmentalists say the answer lies in renewable energy. President Barack Obama has called for 10 percent of U.S. electricity to come from renewable sources by 2012 and 25 percent by 2025, and he has spent more than $32 billion to bring about this change.

What to do with U.S. coal?

The next trend in coal for the United States is to export it to Asia. Coal miners, railroad companies, port companies, and unions are applying tremendous pressure on governmental agencies to build export facilities in British Columbia, Washington, and Oregon. Warren Buffett has bought the railroads that run east/west and has been seen touring the coal mines in Wyoming.

This movement is being fought by local municipalities and environmental movements like Voters Taking Action on Climate Change and the Wilderness Committee, among others, which point to the threat of coal dust from transport as well as fears that the United States would just be exporting its greenhouse gas emissions to China.