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President Trump recently announced the federal government’s intention to withdraw from the Paris Climate Agreement, and while the process to formally withdraw from the global climate treaty will take years, the announcement is an indication of the administration’s intention to create a more favorable business environment for the coal industry. Moreover, rising natural gas prices … More U.S. Rail Coal Shipments To Rise Amid Favorable Business Environment

President Trump recently announced the federal government’s intention to withdraw from the Paris Climate Agreement, and while the process to formally withdraw from the global climate treaty will take years, the announcement is an indication of the administration’s intention to create a more favorable business environment for the coal industry. Moreover, rising natural gas prices should translate into steady growth in coal production in the coming years.

Under the Paris Climate Agreement, the U.S. committed to lower its greenhouse gas emissions by 26-28% below 2005 levels by the year 2025. Had the U.S. followed through on its commitment, it would have led to the rapid substitution of coal by natural gas, a fuel with lower emissions, in electricity generation from 2020 onwards, when the Paris Climate Agreement enters into force. However, with the federal government indicating that it does not plan to follow through on the agreement as a part of its promise to lower restrictive environmental regulations on U.S. industries, the regulatory environment for coal production going forward appears to be favorable.

In addition, natural gas prices, which averaged close to $2.50 per MMBTU in 2016, are likely to rise to $3.17 per MMBTU and $3.43 per MMBTU in 2017 and 2018, respectively. Rising exports of natural gas and LNG, as well as higher demand for natural gas for electricity generation amid strengthening economic conditions, are expected to translate into rising natural gas prices, at least in the near term.

However, in the longer term, the declining production costs of electricity generation from renewable sources could threaten the sustainability of electricity generation from fossil fuels.

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