Leaking Coal to Asia

Posted on October 26, 2015 by Maximilian Auffhammer

​The view from my window high up in the ivory tower is spectacular. Through my open window I breathe in the unpolluted air of knowledge and bask in the glow of theory. Recently I climbed down to attend a hearing at Oakland’s city council about the possible construction of a coal export terminal right here smack dab in the heart of the most liberal metropolis in North America.

Here’s what’s happening. A developer proposed a plan for a new export terminal on an old army base next to Oakland harbor. This is good news. Export terminals lead to lots of jobs and ancillary economic activity. West Oakland is a relatively low-income community with high rates of unemployment. I was excited when I heard about this initially. Recently, however, the proposal was modified to allow for the annual shipment of 4 to 5 million tons of Utah coal abroad, which amounts to roughly a 10% increase in US exports. Why should we care about what gets shipped through a terminal? Well, let me count the ways.
At this hearing, some very fancy lawyers testified that we should not worry about any local negative health consequences from this shift. I am not so sure. We could envision coal dust escaping from the rail cars would end up in kids’ lungs – no matter how covered the cars are. Plus, I would imagine that the ships and trains themselves would lead to increases in local air pollution. Ships are one of the main sources of air pollution in the Bay Area. And, ships that bring coal abroad are not the same high quality shiny new ships we use to bring containers and cars from here to there and back.
More globally, we (finally) have serious regulation at the federal level that address the negative externalities from climate change. Most significantly, the Clean Power Plan will lead to a significant decrease in demand for US coal. Coal, as even my seven year old knows, is the main culprit when talking about greenhouse gas emissions. This is of course bad news for the producers of coal. If demand shifts in, price drops and you sell less at a lower price. Unless you find new markets for your coal, this carbon stays in the ground. Which is the point of climate policy. Period. Well, if you get a shiny new export terminal and can ship coal abroad, that sort of fixes things for you as you now have access to a new market and the coal, whose combustion results in increased emissions of a global pollutant, gets burned anyway.
Countries throughout Asia are burning coal like it’s free (and in some cases it sort of is). Getting more coal of higher quality from the US is a great thing from the Chinese perspective. But from a global perspective it likely is a loser. Here is why I think so:

• I am sure half the economists reading this blog would argue that this high quality coal would displace lower quality higher sulfur coal one for one in China and this would make the world better off. In theory, this might be the case. But over time, this new source of coal generates further incentives to structure your energy economy around coal. Better coal might lead to cleaner air in some parts, but from a climate change point of view, what you want is an energy sector less dependent on coal in the long run. More US coal, which drives down local prices, does not help this objective.
• This proposal undermines the US federal government’s and California’s efforts to curb greenhouse gas emissions. Getting this coal to furnaces abroad guts part of the stated goals of the Clean Power Plan and undermines the point of California’s aggressive climate change goals. We would use the most progressive state in the world on this issue as a launching pad for coal to the rest of the world.

What baffles me about this is the political economy of what is happening. I understand that local leaders in West Oakland are pushing very strongly and convincingly for more jobs in their community. This project would likely lead to increased employment for youth, raise incomes and result in a variety of ancillary benefits that come along with these welfare improvements. I understand that the pushers of coal want a platform for their carbon. If you have something valuable, you want to sell it. The Oakland city council is trying to determine what the right thing is for their community, which is a tough thing to do since the global impacts are not part of their charge.
But where is the state? I would assume that Governor Brown, who has pushed hard for climate regulation and has even talked to the Pope about the issue, would be his usual vocal self in this case. He also has a war chest to come step in. Yes. I am talking about cap and trade revenue. We are currently using some of the early revenue to build a high-speed train project, which will initially connect the Metropolis of Merced with Bakersfield. There are the delta tunnels too. What we should do with cap and trade revenue is many things, but helping communities who are disadvantaged by climate policy is certainly one of them. This assistance could be in the form of job training programs or other job creating initiatives targeted at people disadvantaged by the veto of such a terminal.
At the very least it’s time for a strong signal from Sacramento against new construction of carbon export terminals in California. The existing ones might have some spare capacity, but building new ones undermines California’s environmental legacy and global climate leadership role.

​https://energyathaas.wordpress.com/2015/10/26/leaking-coal-to-asia/

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