Business Spectator: Coal comfort for Europe

Europe's rising energy source is neither natural gas nor renewables: it is coal.

It came as a surprise for some and a spur for others at the second annual Unconventional Gas and Oil Summit in London this week, where optimism over the outlook for UK and European shale gas were riding high.

The US Energy Information Agency says coal exports from the US to Europe rose 23 per cent in 2012 to 66.4 million tons. Those shipments landed disproportionately in Western European countries, while US exports to many Eastern Europe nations actually fell.

This is a consequence of the US shale gas 'revolution'. Coal once used for domestic power generation is being exported and Europe is a fast growing market for the cheap, emissions-heavy product, to the detriment of non-subsidised gas.

On Thursday German natural gas closed at €25.75 (compared to US natural gas futures, which fell to $US3.85 per 1000 cubic feet), coal was priced around €95 a tonne and European emissions allowances on the primary market were €3.90 per tonne/CO2.

European Commission Energy Security Unit science officer Maximilian Kuhn said during the UGOS conference that Europe is competing with Asia for Middle Eastern gas, and prices will rise as a result of tightening global supply, made worse this year by an unusually harsh winter and more generally by demand from China and India.  MORE