An Unexpected Result of State vs. Federal Government Under Trump Administration

The United States has coal that it would like to export. It has coal that it would like to export to Asia, and evidently the best way to do this is to put the coal on ships, rather than flying the coal overseas and dropping it over China like a sooted cropduster. There is a problem however: California, Oregon and Washington state aren’t allowing anyone to export coal, over concerns of climate change. The coal, which comes from places Wyoming, needs a foreign market to go to since the demand for coal in the U.S. has been steadily dropping in recent years, as seen below.

Source

As you’ll notice, energy consumption has continued to grow, but the proportion of total energy consumption using coal has diminished considerably. This is for a number of reasons, not least of which that the United States is now the number one oil producer in the world. Since the practice of fracking has become widespread, the quantity of oil produced in the US has risen dramatically, while the price has dropped. A consequence of this is that the relative price of coal has increased, making it less desirably as a means of energy production.

So, what are coal producers supposed to do? Well, does anyone else need coal? Perhaps a developing country with a juggernaut economy which can use all the energy available right now? Yes, China would like some of our coal. Given the dearth of oil production in their country, their relative cost for using coal is lower and therefore more desirable. The problem is, how to get the coal to China, if the only way to get it there is through boats, which must birth out of California, Oregon, and Washington?

It looks as though Mexico and Canada are raising their hands and saying, “I’ll get your coal to China for you!” Recently, the three countries signed the United States-Mexico-Canada Agreement(USMCA), better known as NAFTA 2.0. This agreement has helped facilitate the export of US coal through Canada, bypassing the blockade by the pacific coast US states, Reuters reports. The policy implications are fascinating and perhaps are an argument for the strength, or perhaps impotence, of states rights. On the one hand, a democratically produced policy has allowed those states to refuse to trade in coal. On the other hand, while Wyoming is not by itself able to export their coal internationally, the federal government can step in and circumvent the coal blockade.

More examples of this may pop up if climate change becomes a more heated debate, and more states adopt trade blockades on fossil fuels. Ultimately however, this may prove to be a moot point at the state level if the federal government remains able to find alternate means of export.

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