May 31, 2007
Coal Industry Wants Big Subsidies For Transportation

The coal industry wants government subsidies to start producing liquid fuels for transportation.

WASHINGTON, May 28 — Even as Congressional leaders draft legislation to reduce greenhouse gases linked to global warming, a powerful roster of Democrats and Republicans is pushing to subsidize coal as the king of alternative fuels.

Prodded by intense lobbying from the coal industry, lawmakers from coal states are proposing that taxpayers guarantee billions of dollars in construction loans for coal-to-liquid production plants, guarantee minimum prices for the new fuel, and guarantee big government purchases for the next 25 years.

The United States has 27% of the world's coal. Russia has 17% and China 13%. Coal can get turned into gaseous and liquid fuels. Tim Appenzeller, a writer for the National Geographic, says if we burned all the world's coal we'd increase atmospheric CO2 by a full order of magnitude.

Coal already generates about half of US electricity and that percentage might rise in coming decades. The coal industry wants big money to encourage greater use of coal for transportation as well. That would almost double CO2 emissions per mile driven.

Among the proposed inducements winding through House and Senate committees: loan guarantees for six to 10 major coal-to-liquid plants, each likely to cost at least $3 billion; a tax credit of 51 cents for every gallon of coal-based fuel sold through 2020; automatic subsidies if oil prices drop below $40 a barrel; and permission for the Air Force to sign 25-year contracts for almost a billion gallons a year of coal-based jet fuel.

I would rather spend the same amount of money on photovoltaic, nuclear, and battery research. Cheap polluting coal is the temptation we need to find ways to avoid. We shouldn't spend tax dollars to embrace it.

If we hit "Peak Oil" 5 years from now will CO2 emissions rise more or less rapidly? That depends on what we replace the oil with. If we shift toward coal-to-liquid then CO2 emissions would skyrocket.

For electricity coal use is growing more rapidly in China than in the US. China's coal use might double in the next 20 to 25 years while US use goes up only 50%. But a shift toward coal use for transportation would make coal use go up even more rapidly.

We need cheaper nuclear and solar photovoltaic power. Add in much cheaper and higher energy density batteries and we could shift transportation away from fossil fuels. That's the future I'd like to see.

Share |      Randall Parker, 2007 May 31 08:38 PM  Energy Policy

Dennis Mangan said at May 31, 2007 9:44 PM:

We may need all those things you say, regardless, all this is bullish for coal stocks.

Fat Man said at May 31, 2007 10:22 PM:

I see no real alternative to liquid fuels for transportation (except electrified railroads). Batteries have limits based on their chemistry, and the fact that they carry both fuel and oxidizer with them that is not far away. However. Nuclear (and solar, if the optimists are to be believed) can displace fossil fuels for all stationary electricity generation, household use, and, most likely, for all industrial processes. One industrial process that can be driven by those sources is synthesis of liquid fuels. Such process use water as the source of hydrogen, but need carbon. Some carbon may be available from various waste streams, but it seems likely that, at the quantities we would need (~500 MT/yr in the US) some of it would have to come from coal. It is not the end of the world. It might be the case that if we adopted such a strategy, we would be cutting our CO2 output dramatically.

Nick said at May 31, 2007 10:35 PM:

The latest proposal would commit $70B to produce 10% of our vehicle fuel needs.

Think what that $ could do elsewhere. If Detroit spent $70B on fuel efficiency, we could raise the CAFE by 100%, and reduce fuel consumption by 50%. Vehicles 6 years old or younger represent 50% of all miles travelled, so this would even work as quickly as building CTL plants.

That $ on wind or solar R&D would probably produce similar returns.

This is not the best place to put our $ and engineering talent.

Perry E. Metzger said at June 1, 2007 7:45 AM:

Fat Man: carbon monoxide for the Fischer-Tropsch process can be extracted from atmospheric CO2. There is no need to inject new carbon into the atmosphere to do it. We will also need synthetic alkanes for plastics and other industrial products.

Michael said at June 1, 2007 7:53 AM:

If they think they have a good thing I say they should go for it. I personally think it is a better idea than making fuel from corn.

It if is competitively priced I will buy it.

However, I see no compelling reason for the government to subsidize it.

Innovation Catalyst said at June 1, 2007 8:38 AM:

Direct carbon fuel cells require a source of carbon. There should be a focused investment on moving DCFCs from a tech demonstration at Lawrence Livermore to a practical solution. Coal would be a great source of carbon for this process, as would charcoal (from woody biomass).

Mark Plus said at June 1, 2007 9:03 AM:

The rush back to coal seems kind of pointless (not to say desperate) if global coal production (.pdf) will peak in about twenty years.

Bigelow said at June 1, 2007 9:04 AM:

"Vehicles 6 years old or younger represent 50% of all miles travelled..."

If just six years of new vehicle replacements gets us halfway there, maybe there is hope for us yet, because
replacing all the vehicles in America with electrics would take decades of business as usual production otherwise.
Have a link for your figure?

Nick said at June 1, 2007 9:23 AM:

There are a number of sources, but this one gives us actual vehicle miles traveled (VMT) by age of vehicle.

From a household survey we see that many households have multiple vehicles, some of which are driven more than others.:

If gas prices were to suddenly double, you could expect that 1) households with multiple vehicles would shift their VMT to the most efficient vehicles, 2) vehicles would transfer between households to maximize use of efficient vehicles, and 3) those with less efficient vehicles would be likely to speed up their turnover. The % of miles travelled by newer and/or most efficent vehicles would probably rise dramatically, and the figure of 6 years (for 50% of VMT) would be likely to shift to 4 or 5 years.

Purenoiz said at June 1, 2007 11:23 AM:

I still like the fact that we Americans, for the most part refuse to even look at adapting our lifestyles to the (coming) changes around us. If this was WWII we would be loosing the war because of our shortsighted nature. Truth is when you drive alone you drive with Al Qaeda, Saudi Dictators, Government subsidies etc...

Ride a bike 1 day a week and stop the obesity epidemic while your at it!

Ned said at June 1, 2007 12:00 PM:

China opens a new coal plant every four days - that's almost 100 per year! China is also the only country still building steam locomotives to run on domestic coal.

I thought we passed welfare reform way back in 1996, but I guess that was just welfare reform for the POOR. The big corporate and agricultural fat cats still like to feed at the public trough. If welfare is so bad for the poor, it's just as bad for the rich. With coal being so abundant and wonderful, why should taxpayers subsidize the coal producers? It's a terrible comment on this Administration and Congress that these subsidies would even be considered. But I forgot the current mantra - privatize profits, socialize costs - means that the producers DESERVE lots of cheap immigrant labor plus tax subsidies. Sorry - I'll try to do better in the future.

Brian Wang said at June 1, 2007 2:25 PM:

I have a fairly comprehensive review of all energy source costs.

The world will be spending about 9 trillion on energy infrastructure over the next 43 years. According to Booz Allen Hamilton consulting
40 trillion on overall infrastructure. The biggest chunk is for water infrastructure. About 9 trillion road, rail and airports as well.

We should have better long term planning and a wholistic approach to energy and transportation. Plus more research on getting to an overall incrementally better situation.

K said at June 1, 2007 6:49 PM:

The coal companies are in great shape. Profits are up. Their stock is up. Their market is growing. They have a lock on much of our electrical generation. Their infrastructure has been paid for years ago. And they own decades of easily accessible reserves.

Did I mention that their competition - oil and natural gas - faces higher prices and possibly shortages?

So we are supposed to give them this new industry and guarantee profits for 25 years while they destroy biodiesel and impede nuclear, solar, and every other source of energy.

I'm with Randall on this one. Several verbs come to mind. Have they said 'it's all for the children yet?'

Randall Parker said at June 1, 2007 7:54 PM:


Yes, you point out the most amazing thing about this story: The coal industry is enjoying high profits and rapidly growing demand. Yet they have the nerve to ask for subsidies from the taxpayers!

If we really are hitting Peak Oil soon then a continued rise in oil prices will provide the incentives to convert coal to liquid fuel without any government checks courtesy of taxpayers.


If hybrid vehicles cost $3000 extra each then $70 billion would pay for the hybrid difference for over 20 million vehicles. But if we really start running out of oil the cost of gasoline will provide enough incentive to switch to hybrids.

However, the cost of hybrids will go down. So the cost of a migration to hybrids become so small that everyone will buy hybrids. Ditto for pluggable hybrids.

Fat Man,

Since most miles are driven locally I expect electricity to cut gasoline usage by more than half. We need achievable improvements in battery technology and then gasoline will only get used for longer trips.

Perry E. Metzger,

I would like to know how expensive it will be to extract carbon from the atmosphere. The biggest reason I can see to use biomass energy is that plants pull carbon out of the atmosphere. If we could use plant carbon and further reduce it with hydrogen from nuclear plants (high temp nukes could be specially designed for hydrogen extraction from water) then we could get high quality liquid fuel for airplanes and long distance car trips.

Brett Bellmore said at June 2, 2007 7:29 AM:

With standardized battery packs and design for quick exchange, you wouldn't need gasoline for long trips, either. You'd just pull into a station where your battery would be swapped out for a fully charged one. There's no engineering reason this couldn't take place as fast, or faster, than filling a tank of gasoline today.

Achieving that level of standardization without running into anti-trust issues could require enabling legislation, though.

Nick said at June 2, 2007 7:50 AM:


A key roadblock to increasing vehicle efficiency is resistance from car makers.

On the one hand, as a practical matter it's probably worth bribing them - it wouldn't cost that much to get much higher efficiencies, especially compared to things like CTL. OTOH, helping Detroit up to a certain point wouldn't be a bribe, given the costs they have that asian manufacturers don't: healthcare, corporate taxation, historically high currency.

Sure, high gas costs will do the job eventually, but we need to get moving.

Mark Plus said at June 2, 2007 7:55 AM:

Purenoiz writes,

I still like the fact that we Americans, for the most part refuse to even look at adapting our lifestyles to the (coming) changes around us. If this was WWII we would be loosing the war because of our shortsighted nature.

The social-democratic trend in American society caused by the Great Depression paid off during the Second World War. We couldn't turn on that kind of dime now because of all the propaganda over the past generation about the virtues of selfishness, hedonism and personal fulfillment. So, we'll just mindlessly drive our cars until we've exhausted the last decent petroleum reserves, coal deposits and topsoil suitable for growing corn.

Randall Parker said at June 2, 2007 9:37 AM:


Here's a proposal I've been meaning to make:

The US government should form a coalition with some state governments and other big fleet operators to approach Detroit with an offer: To buy only hybrid vehicles. If Detroit builds them then the big buyers' club will pay 15% or 20% or some thousand dollars extra (perhaps based on a size class) to buy hybrids.

It already makes sense to choose a hybrid over a non-hybrid if you drive enough miles per year. From an economic perspective the average car buyer ought to have a stronger preference for hybrids than they have currently.

Randall Parker said at June 2, 2007 9:46 AM:

Mark Plus,

Our big problem with coal-to-liquid is that it cost competes with the current price of oil. The only reason we do not see large numbers of CTL plants getting built is that the industry fears a big downturn in oil prices.

CTL would more than double the CO2 emissions per gallon of liquid fuel used. The only way to avoid that doubling would be to do carbon sequestration at the CTL plants and to use nukes to power the CTL plants. But all that would cost more. Note from the full text of that NY Times article that the coal industry has greatly scaled up their lobbyist expenditures because they can increase the value of their coal deposits by multiples if they can scale up into CTL production and avoid costly pollution regs on CO2 emissions and other pollutant emissions.

As a consequence of the economics and the politics of coal I expect once Peak Oil hits CTL will take off unless either governments prohibit it or batteries other non-liquid fuel methods of powering transportation become much cheaper and more feasible.

I'm hoping Peak Oil does not hit until nanotech advances make pure electric cars capable of 400 mile trips.

Also, we could use cellulosic technology to produce sugars combined with hydrogen produced by nukes to produce liquid fuel for airplanes and long haul trucks. The hydrogen could further reduce the sugars into pure hydrocarbons (by "reduce" I mean the chemistry definition: basically replace oxygens bound to carbons with hydrogens).

Melinda said at June 2, 2007 11:26 AM:

Peak oil is passe'. Technology has a way of laughing at all the fake crisis of the past. Peak sperm oil anyone?

China and India are cranking up the CO2 production while the US is dropping its CO2 even without Kyoto. Be a wonder if China survives as fast as it's polluting and contaminating the landscape. Seems like there ain't no accountability over there unless you're a political or religious prisoner. Then they take all your organs and give 'em to the families of party leaders. What a queer way to live.

David Mathews said at June 2, 2007 6:16 PM:

Hello Melinda,

> "Peak oil is passe'. Technology has a way of laughing at all the fake crisis of the past. Peak sperm oil anyone?"

I hate to point of examples of egregious ignorance (though actually I don't), but Melinda: Don't you know that the whales very nearly went extinct?

Bob Badour said at June 3, 2007 9:04 AM:


I suppose that was a crisis for the right whales. It wasn't a crisis for humanity or for industry or for the economy.

Your ability to miss such obvious points astounds me.

Nick said at June 3, 2007 9:57 AM:

Bob, Melinda,

Some crises are real, some aren't, and some are real and straightforward to fix, and some aren't. Broad simplistic generalizations aren't really helpful.

Y2K was real (for computers and the things they controlled), but straightforward to fix. Peak oil is similar.

Peak wood took centuries, and much misery, to fix. The plague took even longer.

Climate change doesn't look at all easy to fix.

David Mathews said at June 3, 2007 2:52 PM:

Hello Bob,

The extinction of the whales is not a crisis for humankind?

Excellent example of humankind's abhorrent morality.

Don't you know that the extinction of Homo sapiens is not a crisis for the whales, Nature, the Earth, the Universe, or even God Himself?

Of all the animals that have ever evolved on the Earth, the naked primate is unique in its suicidal tendencies.

But humankind's self-generated extinction event is not a problem to the present generation of humans. These humans are addicted to an extreme and they cannot see beyond the end of their own nose. They are more concerned about Anna Nicole Smith than they are about the horrendous death that awaits their grandchildren.

Destroy the Earth for profit, destroy the Earth for pleasure, and eradicate Homo sapiens from the Universe forever. There is no tragedy in this outcome. Extinction is a natural outcome of the evolutionary process. Homo sapiens -- as a species -- is evidently too stupid to survive. You can follow this path to its ultimate fate if you wish. I won't stop you.

I am certain that Nature will recover from the human plague just as it has recovered from previous global catastrophes. Nature has endured for billions of years and Nature will continue to prosper for at least a billion more.

bigelow said at June 3, 2007 3:16 PM:


What is passé? The history of energy can be likened to a performer flying from one trapeze to another one which arrives just in time. So it goes with whale oil for illumination, stock of whales were failing fast just as the new kerosene was adopted for lighting; that “rock oil” was just a lucky discovery. Not so lucky, try as we might boundless energy from nuclear fusion is still 50 years away and we are going to have to be awfully inventive to reorder our energy usage and systems to avoid missing the next trapeze and hitting the ground.

Randall Parker said at June 3, 2007 4:00 PM:


Imagine that oil production peaks 5 years from now. Will industrial civilization collapse? No.

As Nick pointed out recently, half of all miles are driven by cars 6 years old or newer. We could switch to pluggable hybrids. Battery tech is advancing and some of the venture capital start-ups for batteries will come through with breakthroughs.

As I see it, we can switch to electric power for most transportation and coal-to-liquid and biomass ethanol for longer trips. That does not create a fall from the trapeze.

David Mathews said at June 3, 2007 7:10 PM:

Hello Randall,

The automobile has no future whatsoever. Industrial civilization will most certainly collapse. The human population explosion will undoubtedly lead to a human population collapse.

Instead of defending the automobile against extinction, you probably ought to begin thinking about how to preserve humankind from extinction.

If you sacrifice the car you might save humankind from extinction. Or maybe not. It is altogether possible that Homo sapiens are entirely a lost cause.

That's life in the cold, dark, harsh Universe. Evolution demands that flawed species go extinct. Homo sapiens evidently possess a fatal, irredeemable flaw. Destroying the living Earth for the sake of dead machines is an act of suicide for a species.

Nature will humble humankind. Delusions of dominance and godhood will be replaced by a desperate struggle for survival on an angry planet.

Even if Homo sapiens somehow survive, technological civilization will not. If humans still survive a hundred thousand years from now they will have more in common with the humans who lived a hundred thousand years ago, and they will have forgotten about this era of techno-insanity altogether.

That's the future. Accept ir or reject it. Time itself will resolve this argument. Truth belongs to the patient.

Randall Parker said at June 3, 2007 7:15 PM:

David Mathews,

Since you are just posting your standard "humanity is evil and doomed" rubbish and not contributing materially to the discussion topic for this thread I'm going to delete any more posts you make on this thread.

David Mathews said at June 3, 2007 7:53 PM:

Hello Randall,

That's unfortunate. Those who cannot deal with reality must close their ears and hide their eyes.

My message will change when humankind changes.

Would you care to defend humankind against my accusations against the species? Let us admit the entire Earth into the testimony as a witness against the primates.

Haven't you noticed? Haven't you heard? All is not well with the Earth. There's some rather big problems with our home planet. These problems are a bit more serious than saving the automobile. They are a bit more important than the iPod and nanotechnology and television and cell phones.

I feel sad for all those who are so enamored by technology that they are blinded to an entire living planet and a Universe so large that it defies comprehension. Is there any tragedy in this Universe greater than the tragedy which is humankind?

Randall Parker said at June 3, 2007 8:26 PM:


I do not mind people who disagree with me. I mind people who deliver a simple message at great length but with little factual content and over and over and over again.

Your comment postings are lazy. I've got other readers who, whether agreeing or disagreeing or just thinking out loud, bring facts with links to the facts. They extend our understanding.

You want to make a case against humanity? I do a better job of that than you do when I post, to take a recent example, info on species extinctions in Europe. I've also posted calculations on how much land we'll use up if we get all our transportation fuel from corn ethanol.

Let me put it another way: Since you just assert what you know you really are only preaching to your own choir of people who already agree with your position. You aren' persuading anyone. In fact, you are marginalizing your position by making it seem like the kind of position that only a nut would argue.

If you think your comments are made to persuade you need to take a hard look at your writing style and put serious effort into making real arguments rather than rants. But if you are only showing up to pose as morally superior to the rest of the sinful plague called the human race then I have no time for you. I'm not here just to give you someone to feel morally superior to.

David Mathews said at June 3, 2007 9:04 PM:

Hello Randall,

I have observed your Facts & Figures and am not impressed by such arguments. They appear entirely meaningless and altogether irrelevant.

If you would care to engage in an argument, we can argue. What shall we argue about?

If the argument is about humankind's negative impact upon the Earth, the entire globe, I am confident that my viewpoint will win.

But I won't provide you with any Facts & Figures. Those are the tools of the blind leading the blind to the abyss.

Do me a favor, Randall. Look outside your window and carefully observe what you see. Describe what you see to me. Tell me what sort of world you are inhabiting.

The evidence on behalf of my viewpoint and the proof of my accusation against humankind is right there in front of your face. Look outside your window, Randall, and tell me what you see.

It is altogether possible that you cannot see anything. Our eyes often become blinded to those things which we would rather not see.

But the proof of my viewpoint is right there in front of you and all around you.

What do you see?

Randall Parker said at June 3, 2007 9:33 PM:

David Mathews,

Outside my window I see a lot of trees and bushes. I'm sitting about 20 feet away from a California Redwood that juts up probably 100 feet. It looks healthy.

Facts and figures: You trust your intuition. Your intuition is wrong. Human intuition can't reveal truths without a great deal of scientific and mathematical rigor to provide it the facts to intuit with.

If you want to be unscientific and assert your intuitively felt truths you are wasting your time and mine and those of the vast bulk of my readers. Also, you are boring.

David Mathews said at June 4, 2007 3:40 AM:

Hello Randall,

I look outside my window and see pine trees. A half dozen pine trees. Beautiful trees, they catch the sunlight every sunrise and sunset.

I love these trees.

Sadly these pine trees are especially remarkable because of their rarity. Whereas a century ago Pinellas country possessed abundant forests and wildlife, today there is only an abundance of asphalt, cars, pollution and obese Homo sapiens who appear so very unhappy with their own existence.

The California redwood looks healthy and it is, but California itself is not healthy. I was in California once and happened to look to the West from the top of a mountain. I saw the ugly brown layer of pollution which is the human contribution to California's atmosphere.

The Earth isn't healthy. Humankind isn't healthy, either. Our species has chosen the wrong path and will pay the ultimate price for this mistake.

Bigelow said at June 4, 2007 6:14 AM:


Fortunately there are more scientists and engineers alive today than in all our history put together. Brain power is available. Efforts are being made. Renewable energy could be supplying most of our power needs if the growth rates of the late 70’s and 80’s had continued. I hope the vested interests don’t sabotage our future again.

Petroleum has provided so much energy for the energy put into getting it that, up until recently, it was essentially a free lunch, a vast energy stipend for human society. We multiplied because of all the extra food that petroleum fertilizers have provided. To reiterate, “we are going to have to be awfully inventive to reorder our energy usage and systems”, precisely because there is no new essentially free energy supply waiting for us to switch to.

The electric grid we would like to plug our PHEV cars into relies on coal for 50% of the power generated, and natural gas. Nukes make up 20% of US power supply. Diesel provides electricity. Renewable power is less than 10% of the mix but coming on strong. So strong, that they can only be effectively smeared by vested interests on the basis of the intermittent nature of their power production. Plugging PHEVs into the grid should help renewables on that account.

Exxon insists there is no peak oil scenario. To do so they simply change their definitions of oil, from light sweet crude to heavy oils, tar sands, all the way to shales. There is a little matter of peak natural gas too. New North American gas wells are depleting by an average 30% after just one year. The century of North American coal reserves is predicated on current rates of consumption. It is not just diesel production, when coal-to-liquids is used to replace the fertilizers, pesticides, plastics and other chemicals presently derived from oil, coal will peak sooner too. Perhaps I should have said we are going to have to be awfully damn lucky and inventive.

Randall Parker said at June 6, 2007 10:00 PM:


Replacements for oil do not have to be free.

We have non-liquid replacements. Our problem is that using non-liquid fuels for transportation is hard. The key enabling technology we need for a shift way from oil is a high energy density long lasting battery for a reasonable price. Given that we can easily handle Peak Oil.

As for heating: We need to build better insulated buildings and then use heat pumps.

We can geenerate quite affordable electricity from nuclear power for less than the most expensive electricity now sold in states with higher electric costs. Nuclear can compete with coal if coal is required to have zero emissions.

Wind and eventually photovoltaics will supply affordable electricity as well.

Nick said at June 7, 2007 8:20 AM:

Randall, I think that there are several batteries that are sufficiently good, meaning that one can build a serial plug-in (PHEV) with them that will 1)have good performance & range; reduce fuel use by 80-90%; and have a total lifecycle cost that is no higher than the average existing ICE vehicle at $3 gasoline. The leading contender appears to be A123systems, but there are a number of others.

PHEV's will enable wind & PV as well as nuclear, as PHEV charging can be scheduled to match their generation characteristics.

Bigelow said at June 7, 2007 12:34 PM:

“Replacements for oil do not have to be free.”

We have grown like they are. We may need more energy than we get.

Energy constraints could swamp us. At the risk of stating the obvious a feeble analogy of our situation is that our boat is sinking. As we bail we must also build a new better boat and help the passengers aboard. I am all for big changes and doing the things you mentioned which require additional energy. Solar panels, PHEVs and heat pumps have to be made. Essentially “free” energy is what we were getting when we got big energy returns on the easy oil. Renewables have to quickly make up for it in quantity. Miss the trapeze, hit the floor.

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