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China Climate Deal

Haul and water trucks work in tandem at Cloud Peak Energy’s Antelope mine, north of Douglas. An agreement between the U.S. and China to reduce carbon dioxide emissions is expected to hurt Wyoming coal producers, who have been working to increase exports to Asia. 

Wyoming coal exports will likely suffer as a result of an agreement by the United States and China to cut carbon dioxide emissions, analysts said Wednesday.

The surprise announcement Tuesday by President Barack Obama and his Chinese counterpart, Xi Jinping, commits the world's two largest carbon emitters to greening their respective power sectors.

The United States would reduce its carbon emissions 26 to 28 percent below 2005 levels by 2025. China would commit to capping its CO2 emissions around 2030 and generating 20 percent of its electricity from low-carbon sources.

The deal represents a blow to Powder River Basin coal companies, which have staked much of their future growth on the idea of boosting exports to Asia, analysts said.

Export scenarios assume robust growth in coal consumption through the 2030s, said Robert Godby, an associate professor at the University of Wyoming specializing in power generation. 

The U.S.-China deal means Chinese coal consumption will be effectively capped in 2030, he said.

"It takes off the table the unlimited coal demand in China some people would like to suggest," Godby said. "They argued there was no way China would constrain its growth with carbon controls. It seems like they just did."

Environmentalists hailed the deal while acknowledging that many of the details still need to be fleshed out.

Jake Schmidt, director of the Natural Resource Defense Council's international program, said the announcement sends a signal to other countries that China, long viewed as a roadblock in climate efforts, is taking efforts to reduce carbon emissions seriously.

The plan puts Chinese coal consumption on track to peak in about 2020, with carbon emissions maxing out a few years later, he said. 

And it recasts the debate over climate change in the United States, where climate skeptics have long argued that American action was worthless without commitments from other countries, he said.

"The bogeyman has always been, 'What about China?" Schmidt said. "This takes that off the table."

Wyoming's Republican congressional delegation was quick to fire back. U.S. Sens. John Barrasso and Mike Enzi said the deal would hamstring the American economy by implementing carbon-cutting measures while helping China, which they said would not have to impose cutbacks until 2030.

Barrasso, in an interview, said the agreement will hurt Wyoming miners and ratepayers in the form of reduced coal demand and higher electricity bills.

The costs of cutting carbon are real, but the benefits are unproven, Barrasso said. He pledged to stop proposed U.S. Environmental Protection Agency regulations aimed at cutting carbon emissions from coal plants by attaching amendments forbidding the cuts to bills Obama wants to sign.

"We want to make energy as clean as we can as fast as we can in a way that doesn’t raise costs for hardworking families," Barrasso said. "Even when the president had 60 votes in the Democrat side in the Senate, he couldn’t get these things passed. Even Democrats are against what he is proposing."

Enzi termed the deal a "lopsided agreement," which will boost the economy in China. "In America, it will put a dent in every family’s budget, and I’m not sure why we would voluntarily let that happen,” he said in a statement.

Wyoming is the country's leading coal-producing state, accounting for 40 percent of America's coal production. An increasingly strict regulatory climate, coupled with the growing availability of cheap natural gas, has prompted the state's mining firms to look abroad in recent years.

China, which makes up nearly half the world's coal consumption, represents the most lucrative market.

Sending Wyoming coal to China has been more difficult. Environmentalists have stymied efforts to build coal export docks in the Pacific Northwest.

More recently, the combination of a slowing Chinese economy and oversupplied market have sent coal prices tumbling, prompting Wyoming mines to lower their short-term export forecasts.

American exports to China were down nearly 79 percent through the first half of 2014 compared with the total in the prior year, according to the U.S. Energy Information Agency.

U.S. shipments to China were 1.4  million tons in the first six months of 2014, compared with 6.5 million tons in the first half of 2013. American coal exports to Asia were down almost 30 percent, to 11.5 million tons, in the first half of 2014.

Peabody Energy, the largest publicly traded coal company in the U.S. and owner of the North Antelope Rochelle Mine, outside Gillette, applauded the deal, noting that it included an agreement from the U.S. and China to work together on carbon capture technologies.

Peabody CEO Gregory Boyce urged the Obama administration to drop its proposals to limit carbon emissions and instead pursue plans to develop clean coal technologies.

The Wyoming Mining Association is taking a wait-and-see approach to the climate deal, said Vice President Travis Deti.

The emissions cuts are scheduled for the future, and pro-coal Republicans now control both chambers in Congress, meaning the damage could be limited or avoided.

But the agreement still figures to be bad news for Wyoming, he said, noting that it could cost the state jobs and revenue.

"When the administration presses ahead with initiatives like this, we’re concerned," Deti said. "You take away customers, and ultimately it hurts the industry back home."

David Wendt, president of the Jackson Hole Center for Global Affairs, was a rare voice who said the deal is good news for the state.

China's commitment to cut carbon emissions will help spur the development of clean coal technologies, Wendt said. Clean coal will ultimately be the savior of Wyoming's mines, he argued.

"If we take the longer view, we should take heart from this development," Wendt said. "We need to join with partners in China and here in the U.S. to ensure a viable future for coal."

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Reach energy reporter Benjamin Storrow at 307-335-5344 or Follow him on Twitter @bstorrow


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