China's Coal Imports Good News for Natural Gas
China is giving the rest of the world a huge push to use cleaner energy by bidding up the global price of coal and making it less competitive with greener alternatives. Last year, China's imports accounted for nearly 15% of all globally traded coal. This year, rapidly increasing imports are set to account for an even larger share of the entire global coal market.
China's substantial purchases on the global coal market have driven the world price of coal up relative to natural gas. Real natural prices in the US and Europe are near record lows because of low levels of economic activity in these regions and increased gas supplies from unconventional sources.
The global coal price increase caused by China's actions means that major coal-consuming regions with the ability to run more natural gas-fired generation capacity and less coal-fired capacity will do so.
To get a rough idea of the scale of these CO2 reductions, note that the European Union and the US consume roughly 7bn MWh of electricity annually. Approximately 1 ton of CO2 emission is produced per MWh of electricity from a typical coal-fired generation unit, while burning natural gas emits only half as much. If 5% of these MWhs were produced using natural gas instead of coal due to China raising the international coal price, a 175m ton drop in CO2 emissions is the result. This is equivalent to taking 32 million cars off the road in the US and Europe.
The more expensive China makes global coal supplies, the more competitive cleaner energy becomes in the developed world and the lower will be CO2 emissions. In a world without a price on carbon, we can only hope that China takes all of the rest of the world's coal it can get.
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