Coal Is The New Gold

A report in the <?xml:namespace prefix = st1 ns = “urn:schemas-microsoft-com:office:smarttags” />United States has found that coal is becoming ever more important as a global energy source with much of the increase being attributable to China.<?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />

According to the report carried out by The Wall Street Journal, part of the problem is that demand in China appears to be growing faster than regulators’ ability to police emissions.

A few years ago, when demand wasn't so strong, the Chinese government moved to shut thousands of substandard coal operations.  Chinese coal production tumbled by more than 25 percent to about 500 million tons of oil equivalent in 2000, according to BP data.

Then when China's economy took flight by 2003, coal production in the Asian country had soared to 842 million tons of oil equivalent.  If recent trends hold, production could rise to nearly one billion tons of oil equivalent this year.

Chinese officials have announced ambitious plans to diversify the country's energy supply, quadrupling its nuclear-power generation capacity by 2020 and adding numerous terminals to process imported liquefied natural gas.  Chinese officials say these and other investments should reduce coal's share of the country's power needs to about 54 percent from 67 percent currently, while natural gas will increase to 10 percent from 3 percent now.

But many independent economists doubt that coal's share in China will decline significantly, given that coal is inexpensive and plentiful.  Most of China's new power plants are coal-fired, and will be around for decades. 

Adding more nuclear, gas, and hydroelectric facilities will involve massive investments that could make the power they generate more expensive, limiting its attractiveness. 

In the U.S. and Europe, however, the cost of cleaning up coal plants and the anticipated cost of carbon capture, as well as a run-up in natural-gas costs, are making nuclear power more competitive.