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Canada: Cheap Coal Could Pay for Greenhouse Gas Remediation


By Ian Madsen, Frontier Centre for Public Policy


Lately, the Climate Change Apocalypse lobby has gone into overdrive in their efforts to browbeat reluctant consumers, businesses and governments to wholly eliminate fossil fuels and commit to putting all future energy investment into renewable energy.  That did not work out well for Spain, Germany, or anywhere else that has tried it, and there is little indication that it would be a new Utopia here, either.  However, there is an alternative that is available and it might seem counterintuitive.

That alternative is the much maligned, most abundant energy source on the planet (other than the sun, whose radiation cannot be economically captured and stored for use at convenient time):  coal. Its byproducts are almost entirely the reviled greenhouse gas, ‘GHG’, carbon dioxide; CO2 for short.  (Reviled, of course, only if you subscribe to the orthodoxy that CO2 is “pollution” but that is another topic for another day.)

As of April 13th, 2022, the price of ‘steam’ coal; i.e., for power generation, was USD$312 per tonne. [All figures from Trading Economics website] Each tonne has about 30 gigajoules of energy.  This means it costs roughly $10.40 per GJ.  Currently, natural gas costs about USD$7.035 per GJ. However, there is a shortage of the pipelines, liquefaction plants and LNG carriers which export it. This ‘bottling up’ of gas discourages more production – it has nowhere to go. This situation looks like it will continue for a while, given energy policy in North America and Europe, which also discourages exploration and production of natural gas and associated liquids – i.e., mostly oil – and the transport of them to where the demand is.

That is likely why a major reason for the higher cost of the unloved coal in energy terms is that natural gas is bottled up in North America, where it is in surplus, and hence lower in price than it is in Europe.  Natural gas there traded at the equivalent of USD$31.85 per GJ (EUR105.32 per MW-hr), or five times what it goes for on this side of the Atlantic. The coal price is the same everywhere. High Efficiency, Low Emission coal fired electricity generation plants are a little more efficient than gas-fired ones, generally, but, assuming they are similar in efficiency, it superficially seems to make sense to replace coal fired plants with gas ones; at least, when the coal ones approach their end-of-useful-life.

However, there is actually an artificial scarcity of coal at present. As recently as spring of last year, coal was trading at USD$100 per tonne, which would make it much cheaper than natural gas, even if the latter’s price dropped in half, to about where it was a year ago as well.  Assuming that markets reach a new, and more normal equilibrium, which would reaffirm this recent price-value relationship between the two fuels, an interesting possibility emerges:  use coal-fired power for all new generating stations, here and overseas. In fact, China and India are doing so regardless; they put their economies and affordable energy for their people ahead of idealistic, and unrealistic, climate change mitigation goals.

Supplying city dwellers with power has a rule of thumb of about one kilowatt per person, or one gigawatt per million people in capacity.  A gigawatt produced over 24 hours times 365 days times 60 minutes in an hour and 60 seconds in a minute equals 31.35 million GJ. Dividing that figure by an efficiency of about 50% equals 62.7 million GJ of coal; or about 2 million tonnes of it.  At USD$300 per tonne these days of artificial or war-inflated demand, power thus generated would have a marginal cash cost of $600 million, or $0.068 per kW-hour.  Were coal to become more sane, say $100, it becomes $0.021. If that seems fanciful, at $200 coal, power would be $0.045. These figures neglect transmission and distribution costs, and the depreciation of the generating facilities, which could magnify prices.

The point of these calculations is to show that, even with currently inflated coal prices, coal-fired power is very economical and thus attractive.  As for CO2 emissions, this cheapness is the opportunity.  It costs pennies to plant a tree seedling.  The current carbon taxes in the EU and Canada could be dropped to a few dollars per tonne of coal and the revenues thereby derived spent on planting the trees that are key to sequestering all that carbon, from power and elsewhere.  Supplying power to one hundred million people would consume 200 million tonnes of coal a year, and require planting several billion trees over the next few decades. It beats squandering trillions of dollars on intermittent, unreliable power from dubious alternative energy sources that also use critical minerals that come from another undependable potential adversary, China.  India, China and Africa, and maybe Europe too, will be adding more coal capacity. It is time to do what may have been unthinkable even last year, and dive into coal, and use the savings to offset much or all of the allegedly deleterious emissions.


Ian Madsen is a Senior Policy Analyst at the Frontier Centre for Public Policy. He has extensive experience in portfolio and financial analysis.