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Podcast: Is Coal As Good As Done?

Apr 14, 2016

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SMITH BRAIN TRUST — U.S.-based coal giant Peabody Energy’s bankruptcy filing on Wednesday reflects an industry on the ropes, economist Peter Morici at the University of Maryand’s Robert H. Smith School of Business tells the BBC in a broadcast today from Washington, D.C., and Beijing. The dying coal industry is hitting Wyoming especially hard. The state is home to the largest U.S. mine, where Peabody has cut production and laid off workers. Coal generates about one-quarter of Wyoming revenue, and its overall production is down 30 percent and dropping since Jan. 1, 2016. Morici cites three major factors.

A glut of natural gas: He says a spike in natural gas supply is landing the hardest blows on the world’s largest privately owned coal producer. “That’s the real enemy of coal — natural gas," Morici says. Though not as pristine as solar, he says natural gas emits less carbon than coal and represents the most practical coal substitute.

Slowdown in China: Spillover from the slumping steel industry compounds the challenges because metallurgical-grade coal is used to make steel. Timed with China’s economic slowdown, steelmakers there are suspected of dumping excess production on the global market. "China is exporting at very low prices and, in effect, pushing its unemployment into other places by imperiling, for example, the steel industries in the United States and Europe,” Morici says. A German Press Agency correspondent in China, who joined Morici on the BBC broadcast, says the government there will cut 1.8 million jobs, representing 15 percent of China’s workforce in the steel and coal industries, over the next few years and close “a lot of lower-producing factories.” Peabody has a major problem because of that. "Clearly, the Chinese will be making less steel," Morici says. "So if you’re not selling to China, where do you sell?"

U.S. environmental policy: The third key factor, Morici says, is “the President’s policy to shift America out of coal for the purpose of reducing CO2 emissions.” Some would even see coal’s demise as something positive. But United Mine Workers of America Director of Governmental Affairs Phil Smith on the broadcast with Morici points to the human toll: “If government policy is geared to end the production of coal for electricity, there ought to be government policy to take care of tens of thousands of miners and their families who are threatened by the end of this industry,” he says.

Even if coal production declines in the United States, Smith says it will remain a staple in underdeveloped and developing economies in places such as Africa, India and Indonesia. Subsequently, carbon-emission lowering as a global effort hinges on continued development of clean-coal technologies, instead of eliminating coal. Listen to the BBC segment below, including Morici's comments starting at 8:00.

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The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, online MBA, specialty master's, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.

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