Quirks & Quarks

Trump is losing the 'war on coal' to the free market

Coal's collapse in the US and the Energy East pipeline cancellation in Canada may be mostly due to investors, not climate concerns.
US President Donald Trump signs an Energy Independence Executive Order at the Environmental Protection Agency (EPA) Headquarters on March 28, 2017 in Washington, DC. This week EPA Administrator Scott Pruitt (right) revoked the Clean Power Plan. (Getty Images)

The war on coal and the end of a pipeline 

Two big stories around energy and climate change made headlines in the last week. This week Scott Pruitt, the administrator of the US Environmental Protection agency announced the repeal of President Obama's Clean Power Plan, and what he said was the end of the "war on coal." The Clean Power Plan set standards for carbon emissions in the electrical power industry, which likely would have led to the decomissioning of many coal-fired electrical generating stations. The plan was never implemented, as it immediately faced legal challenges, but has nevertheless been blamed for coal-plant closures and the roughly 10 per cent drop in coal-based electrical generation in recent years.

Emissions rise from a smokestack at a generating station in Harrodsburg, Kentucky (Bloomberg via Getty Images)
In Canada the TransCanada Corporation announced it was canceling plans to develop the Energy East pipeline project, which would have carried oilsands bitumen from Alberta to terminals in eastern Canada. Climate change activists celebrated, but pipeline supporters blamed new government carbon emission regulations for the cancellation, and the loss of potential pipeline construction jobs.

Was it regulation or the power of the markets?

Some analysts suggest that it may have been energy markets, more than regulation or activism, that have led to the decline of US coal-fired power generation, and the cancellation of the Energy East pipeline project.

According to Dr. Nicholas Rivers, Canada Research Chair in Climate and Energy Policy at the University of Alberta, the decline in coal-fired electricity generation in the US is mostly due to competition. Increases in natural gas production from fracking led to many utilities to close coal plants, convert them to gas, or build new gas plants. In addition, the adoption of renewables like wind and solar has been far faster than many analysts had anticipated, and in some markets these technologies are now generating electricity more cheaply than coal. 

As a result, forecasters now think that even though the Clean Power Plan is dead, its goals for emissions reductions may still be met.

PIpeline segments ready for installation (Alex Panetta/The Canadian Press)
Energy East, according to Dr. Andrew Leach, an energy economist in the Alberta Business School at the University of Alberta, may have been a victim of low oil prices and Donald Trump. When President Trump approved the building of the Keystone XL pipeline, new capacity opened up for shipping Alberta bitumen. However the world is afloat in cheap oil, thanks to the fracking boom in Texas.  So demand for high cost oil-sands products is too low to justify building the Energy East pipeline as well.

The Energy East cancellation is not necessarily good news from a global greenhouse-gas perspective. Since it was an oil boom elsewhere that partly doomed it, the demise of the pipeline won't necessarily lead to future greenhouse gas emission reductions.