‘Leave it in the Ground?’ USA begins to Act on Coal – Should We Follow?

As reported here earlier President Obama in his recent State of the Union Address indicated that he was going to take action on coal and possibly introduce a ban on issuing new licences. Now there are news reports that he has done just that:

‘U.S. halts new coal leases on federal land, first review in decades’ (Reuters, 15/1/16) @ http://www.reuters.com/article/us-usa-coal-idUSKCN0US2WB

Obama has acted on the statement made in his recent State of the Union address and called a halt to approving new mine leases for 3 years whilst the US Government reviews the environmental impact of using coal and causing climate change and costing the value of the coal mined.

Coal on federal land accounts for 40% of USA’s coal production

COMMENT: However well intentioned, this ban will over time, have the effect of reducing the supply of coal as existing mines get worked out. All thing being equal, if the demand for coal for power generation purposes remains constant in the USA, it will tend to increase the cost of coal. The latest figures from the US Energy Administration show US coal production figures falling to 890.5m short tonnes in 2015 whilst coal consumption for electricity also fell to 754mst. (See ‘Short Term Energy Outlook, 12/1/16) @ http://www.eia.gov/forecasts/steo/report/coal.cfm)

The longer the ban remains in place the more likely it will have a positive impact on global coal prices that influence whether UK Coal Operators will decide to exploit new UK coal reserves.

So although this ban is good in itself, unless other states follow suit, it will, ironically, increase the risk that coal reserves elsewhere, including those in the UK  will become economic to exploit.  The UK Government should therefore follows the US example and also have a moratorium on approving new surface coalmine approvals in the UK.