Coal is public enemy No. 1 for most environmental activist groups. Certainly, there’s some logic behind that opposition; after all, coal plants emit more sulphur dioxide, mercury and nitrous oxides than other fossil fuels.

In addition, the drive to control carbon-dioxide (CO₂) emissions has become the cause celebre for most environmental groups. Coal is the most carbon-intensive fuel, emitting nearly twice as much CO₂ to produce the same amount of electricity as natural gas. It’s this simple fact that drives many to protest new plant construction.

And it appears, environmental opposition is having some real impact. A total of 59 new coal-fired power plant projects were canceled last year, many because of environmental concerns. It’s not my place to comment on the importance, speed or need to regulate CO₂ emissions. However, it’s obvious governments the world over are planning to regulate CO₂, including the US. Therefore, as investors, we simply can’t afford to ignore the issue.

One of the most obvious consequences: Utilities are reluctant to build new coal-fired capacity because of uncertainty surrounding the potential cost of proposed CO₂ legislation in the US.

But what is truly ironic is that environmental opposition to new coal-fired plants is actually causing a massive increase in carbon emissions in the US. In fact, each new plant that’s canceled or abandoned in North America not only directly increases carbon emissions but also delays the adoption of clean coal technologies that could make the fuel more environmentally palatable.

Generating efficiency is a measure of how effectively a plant converts energy in coal to electricity; the higher the number, the more efficient the plant. Check out my table below for a closer look at emissions from different types of coal plant.

Old versus New
	Subcritical PC	Supercritical PC	Ultra-Supercritical PC
Generating Efficiency (HHV)	34.3	38.5	43.3
Coal Feed (Kg/Hr)	208,000	185,000	164,000
Carbon Dioxide Emitted (Kg/Hr)	466,000	415,000	369,000
Total Plant Cost (USD/KW)	1,280	1,330	1,360

Source: The Future of Coal: Options for a Carbon-Constrained World, Massachusetts Institute of Technology, 2007.

All pulverized coal (PC) plants work in the same basic manner. Coal is ground into a powder of roughly the same consistency as talcum powder. That powder is then injected into a boiler and ignited; the heat created is used to produce steam that, in turn, drives a turbine.

Older so-called subcritical plants run at lower pressures and temperatures than newer supercritical and ultra-supercritical plants. The higher pressures and temperatures of newer plants make these facilities more efficient at converting energy in coal into electricity.

Note the difference between older-style, subcritical PC plants and the most modern ultra-supercritical plants is large. The efficiency ratio is nearly 10 percentage points higher. That means more modern plants consume far less coal to produce the same amount of energy.

To quantify that even further, note the ultra-supercritical, 500-megawatt (MW) plant consumes 44,000 kilograms (97,000 pounds) less coal per hour than the referenced subcritical plant.

The most efficient plant in the table above produces nearly 100,000 kilograms (220,000 pounds) less CO₂ per hour than an older-style, subcritical plant, with absolutely no use of carbon capture and sequestration (CCS) technologies. Nonetheless, this line of reasoning has little traction with environmental and consumer groups that oppose new plant construction. Therefore, building even the most efficient coal plants is problematic for utilities.

But what’s bad for the environment is a big positive for coal demand. The US will continue to rely on the existing base of coal-fired facilities; the average coal plant is already about 30 years old. These plants burn more coal to produce the same measure of electricity.

And utilities need all the electric capacity they can get. According to data from the North American Electric Reliability Corporation (NERC), many regions of the US are nearing a critical point; power capacity just isn’t sufficient to meet rising demand. For some parts of the US, power supply reliability will fall below acceptable standards within the next three years.

One way companies respond to that is to increase utilization of their existing plants. That’s a fancy way of saying that utilities will run their existing, older plants harder.

I don’t see the wave of coal plant cancellations as an impediment to further upside in coal prices and stocks of coal mining firms. Rather, growth in coal-fired capacity in the developing world will offset any plant construction delays in the US. And every coal plant that’s canceled or blocked in the US spells more coal burned in older coal-guzzling plants.

And it’s even worse than that. Current coal capture and sequestration (CCS) technologies—methods for removing carbon from power plant emissions and permanently storing it—are relatively expensive and reduce the generating efficiency of plants.

These technologies are unproven when it comes to power plants. No company has built a full-sized plant that captures and stores carbon. That said, Norway’s Statoil uses the basic technology on its Sleipner gas field in the North Sea. Gas from that field is mixed with particularly large quantities of CO₂.

To avoid Norway’s carbon tax, Statoil uses carbon-capture technologies to strip CO₂ from the gas as its produced; that CO₂ is then injected into a shallow natural geologic formation in the same region. That formation currently contains only salt water. It has plenty of capacity to provide for decade’s worth of CO₂ storage. This is a successful project that’s been in operation for more than a decade.

Capturing carbon is harder from power plant emissions than from Sleipner; however, the Sleipner project proves that CCS isn’t just some pie-in-the-sky idea.

But most experts agree that the same basic technology wouldn’t be efficient or economically feasible for older-style coal plants. If CCS technologies were installed on such plants, the efficiency ratio would simply drop too much. But CCS technologies could be applied to newer generation plants; by not opening new, more efficient plants, the US is limiting its potential to roll out CCS.