NEW YORK (GBI Research)- South and Central America’s heavily export-oriented coal mining industry may suffer as destination countries move their energy preferences away from environmentally harmful sources, according to a new report by industry intelligence experts GBI Research.
The new report found that South and Central American coal exports may decline in the future due to environmental regulations being set up by major importers like the US and Europe that discourage the use of coal-fired power plants.
While South and Central America produce modest amounts of coal – production was estimated at 109.9 million metric tons (MMt) last year, accounting for just 2% of total global coal production – the region exported around 87 MMt in 2011, highlighting coal’s significance as a source of revenue for the region.
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However, strict regulations passed by the United States Environmental Protection Agency (USEPA), which aim to reduce carbon emissions by 2014, are anticipated to damage the revenue gained by South and Central America through coal exports. Similarly, the EU directive on renewable energies in Europe requires each EU member state to increase its share of renewable energies in their total energy mix to 16% by 2020. At the same time, many European nations are planning to shut down half of their coal-fired power plants, and thereby reduce greenhouse gas emissions (GHG) by 80%-95% from 1990 levels, by 2050.
In light of these developments, coal production in the region is anticipated to experience slower-than-expected growth. However, due to a rapidly expanding industrial sector, regional coal production is expected to grow at a Compound Annual Growth Rate (CAGR) of 5.4% during the next eight years to reach 177.8 MMt by 2020.
On the other hand, tougher emission rules in the US will likely force coal companies to start exporting more to countries in Asia where environmental regulations are less stringent. The EPA announced the first move by the US to regulate the gas blamed for contributing to global warming came about in the proposed rules to limit new power plants' CO2 emissions Tuesday. Coal-fired plants currently account for about 44 percent of US electricity.