As coal takes a larger roal in the United States’ energy picture, its effect on the environment must be considered.

To appreciate the role of coal in the climate change debate, we should start with an appreciation for coal’s role in the U.S. economy. Coal generates half of our electricity today – and is forecast to generate 57 percent by 2030.

Keep in mind this is a growing share of a growing market. As we know, demand for electricity is projected to grow by 40 percent over the same period. This fact alone – that we are a growing nation of more than 300 million people who require more and more electricity – cannot be understated. Nor should it be ignored.

It obliges us to ask ourselves: how we will generate the power that is increasingly vital to our economic growth? The question applies to our entire energy portfolio – from electric power to transportation fuels to feedstocks for manufacturing. The dimension and complexity of these challenges make them difficult to resolve.

Certainly, I do not have all of the answers. I do believe that America’s response to the intertwined challenges of climate change and energy policy will bear fateful consequences. And I am certain that arbitrarily capping coal use could have profound economic consequences for the nation.

The reason lies in coal’s dominant role in the power generation market–to say nothing of its potential to provide 2.6 million barrels a day of premium transportation fuels from coal liquefaction or to meet many industrial needs through coal gasification. Behind this dominance is the fact that the United States has 27 percent of the world’s coal reserves, the largest of any country.

Just to put this in perspective, on an energy equivalent basis, the 54 hundred quadrillion British thermal units (BTU) of U.S. coal surpass the 44 hundred quadrillion BTU of Middle East oil. Not only is coal bundant here–with an estimated 240-year supply–it is also very affordable.

This makes coal an enormously valuable domestic resource for a country that expects its electricity demand to grow significantly over the same time that the world’s demand for energy is expected to rise by an extraordinary 50 percent by 2030. In a world roiled by political turmoil and marked by increasing competition for available energy reserves, this fact looms ever larger.

In short, coal is ours, it’s accessible and we have lots of it. We do not have to import coal, spend enormous sums to find it or worry about a foreign government nationalizing it.

So to answer the riddle: how will this country provide the energy for its future growth?     I would say, along with others who are familiar with the energy demands placed on our economy, that first, all sources of energy must be utilized. Second, that coal must obviously be a large part of this nation’s energy mix.

And third, prudent steps must be taken  to use energy more efficiently. But how to mitigate climate change? It follows from what I have said that the answer is “carefully.” The way we respond to climate change need not conflict with our response to the energy demand question.

Certainly the coal industry does not quarrel with the objective of addressing greenhouse gas emissions. We do object to the means some propose for dealing with this important issue–especially if they ignore technology.

A case in point is legislation proposed by Sens. Joe Lieberman (D-Conn.) and John Warner (R-Va.). Their bill:

• Mandates very aggressive CO2 reductions over the next decade–caps that will drive energy costs up and jobs offshore;
• Has no meaningful provisions for mitigating the impact on carbon-intensive industries or the economy as a whole;
• Will not provide the ambitious funding levels that are needed to accelerate the development and deployment of carbon capture and storage technology; and
  
• Does not synchronize the imposition of controls with the anticipated availability of carbon capture and storage technology.
  

The result from these deficiencies would almost certainly be costly fuel switching by power plants from coal to natural gas, whose supply is already constrained. In fact, an economic impact analysis of Lieberman-Warner by CRA International estimates the bill would accelerate the nation’s de-industrialization, cost up to 2.3 million jobs, raise wholesale electricity prices as much as 65 percent by 2015, and cost the average family of four about $3,500 a year.

As more senators focus on its consequences, the Lieberman-Warner bill’s prospects in the full Senate fade. Meanwhile in the House, Reps. John Dingell (D-Mich.) and Rick Boucher (D-Va.), who chair the committee and subcommittee of jurisdiction, intend to take up climate change legislation later this year. The chairmen will produce additional policy white papers as a precursor to drafting legislative language.

This caution is understandable. The closer Congress looks at imposing mandatory controls, and at their complexity and costs, the less certain it is that controls alone are the answer.

There is no assurance that sufficient investment will flow to carbon-capture technologies so long as power companies can switch to other fuels–despite their cost compared to coal. Certainly the European Union’s experience with the Kyoto Treaty offers little encouragement that such a system will work as well in practice as it does in theory.

Already, eight member countries have sued or plan to sue the European Commission for tightening caps on emissions and Japan itself is falling behind its promised emissions reductions. Moreover, mandatory controls such as those currently being proposed will do little to improve the environment.

Reducing U.S. emissions will not have any meaningful impact on atmospheric greenhouse gas concentrations when emissions from China and India already surpass our own. Capping our emissions unilaterally will be all pain for U.S. consumers and little gain for the environment. This is not a reason for doing nothing. But it is a reason for carefully examining the costs and benefits of whatever we do.

Thankfully, some in Congress are turning to a major policy tenet of the National
Mining Association–namely, that a technology pathway should be built before we impose mandatory carbon controls. Specifically, we should remove regulatory impediments to improved power plant efficiency and accelerate funding for the development and deployment of carbon capture and storage technology.

Most experts–from MIT’s to those in industry research institutions–believe the
United States should be investing far more in capture-and-storage technology. They recommend an investment of at least $2 billion annually for the next 15 years over and above what the federal government is currently spending.

Granted, $2 billion a year is a lot of money. But it would buy a lot of value for a nation so heavily dependent on coal to secure its energy future.

This funding would be for basic R&D on carbon capture but also for the large-scale demonstration projects needed for new and existing power plants. We have already taken an important step in this direction with the official announcement last month that the FutureGen site has been awarded to Illinois.

This billion-dollar-plus coal-based plant will generate electricity with virtually no emissions and store the CO2 underground. The FutureGen project mirrors the global dimension of the climate change challenge.

In addition to a private sector alliance of coal companies, power companies and mining machinery companies that are contributing to the funding, the project also enlists support from the United States, China, India and South Korea. But FutureGen is just a start.

If, as some suggest, global warming is the greatest threat confronting our planet, then we should embark today on the equivalent of the Apollo Project to develop the CCS technology to generate near-emissions-free electricity from coal.

Thanks largely to clean coal technology, since 1970, U.S. power plants have reduced emissions of conventional pollutants by 40 percent while tripling coal use to generate electricity. A new power plant built today emits 90 percent fewer pollutants than the plant it typically replaces.

I’m confident that a sufficient commitment of dollars and ingenuity would have equal success in reducing greenhouse gas emissions. At the same time, more incentives are needed to ease the cost of installing advanced clean coal technologies such as coal gasification and ultra-supercritical pulverized coal.

These technologies can enhance the efficiency of coal plants so that less carbon is emitted for every BTU of energy produced. Each efficiency gain of 2 percent yields a 5 percent reduction in CO2.

NMA believes it is critically important that policymakers not put the cart of mandatory controls before the technology horse. And we expect to see legislation advancing a technology-centered solution for climate change introduced shortly.

Such a technology roadmap can lead to a more socially responsible use of our country’s unrivalled coal reserves while providing Americans with economic prosperity and security in an increasingly unsettled world.
   
Kraig R. Naasz is president and CEO of the National Mining Association. His remarks were edited from a speech he delivered to the U.S. Energy Association in January. For more information, visit the www.nma.org.