Economics of the International Coal Trade

Coal, the catalyst of the industrial age, is now poised to shape how the world consumes energy in the twenty-?rst century.

The ascendance of oil in the global economy to a looming peak is forcing countries, companies, and consumers to reconsider their relationship to something they cannot live without: energy. And whileothersourcesofenergy,suchasnuclear,naturalgas,andrenewables,willall play an ever greater role in serving demand, intelligent observers would be wise not to miss what is perhaps the clearest trend of all: the second coal era is now uponus.

Thedevelopingworldisrapidlyelectrifyinginordertodriveeconomicgrowth. Andelectri?cationmeanscoal.ThisisparticularlytrueinIndiaandChina,where coaloffersthecheapestandmostreliableroutetoelectricpower.Thesetwoco- triesalonewilldrive80%ofcoalconsumptiongrowthto2030.TheInternational EnergyAgencyexpectsthatglobalcoalconsumptionwillincreaseby60%inthe nexttwodecades.LarsSchernikau'sTheRenaissanceofSteamCoalcouldnotcome atabettertime.Lars'skillintracingthelongarcofindustrialevolutionpairedwith his acute knowledge of the coal market make his arguments both insightful and highlycredible.Hebeginsbysuccinctlyframingtheproblemanddistillingourc- rentpredicament:wearecaughtbetween'theOilAge'andthe'theSolarAge'(by thishemeanstheageofrenewables). Wearealloptimiststosomedegree,butthe realistsamongusknowthatrenewableenergyisnotgoingtocompletely?llthis gapfordecades.Where,then,doesthisleaveus?ItleavesuswithTheRenaissance ofSteamCoal.

Coal is now the world's fastest growing source of fossil fuel, a position it is expected to hold for the foreseeable future.

Yet the coal market is far less well understoodthantheoilorgasmarkets.Academics,policymakers,andmarketp- ticipantsarefacedwiththeprospectofourcollectiveknowledgeaboutthismarket notkeepingpacewithitsincreasingrelevance.Coal,only30yearsagoalocalized fuelsource,isnowavolatileglobalcommoditywithbanksandhedgefundspiling intotheoncetraditionalbusiness.Notonlyisthecoalmarketnowmorerelevant thanever,it'salsomuchmorecomplex.