Clemens Haftendorn

What About Coal? Interactions between Climate Policies and the Global Steam Coal Market Until 2030

Because of economic growth and a strong increase in global energy demand the demand for fossil fuels and therefore also greenhouse gas emissions are increasing, although climate policy should lead to the opposite effect. The coal market is of special relevance as coal is available in many countries and often the first choice to meet energy demand. In this paper we assess possible interactions between climate policies and the global steam coal market. Possible market adjustments between demand regions through market effects are investigated with a numerical model of the global steam coal market: the “COALMOD-World” model. This equilibrium model computes future trade flows, infrastructure investments and prices until 2030. We investigate three specific designs of climate policy: a unilateral European climate policy, an Indonesian export-limiting policy and a fast-roll out of carbon capture and storage (CCS) in the broader context of climate policy and market constraints. We find that market adjustment effects in the coal market can have significant positive and negative impacts on the effectiveness of climate policies.

Evidence of Market Power in the Atlantic Steam Coal Market Using Oligopoly Models with a Competitive Fringe

Before 2004 South Africa was the dominant steam coal exporter to the European market. However a new market situation with rising global demand and prices makes room for a new entrant: Russia. The hypothesis investigated in this paper is that the three incumbent dominant firms located in South Africa and Colombia reacted to that new situation by exerting market power and withheld quantities from the market in 2004 and 2005. Three market structure scenarios of oligopoly with a competitive fringe are developed to investigate this hypothesis: a Stackelberg model with a cartel, a Stackelberg model with a Cournot-oligopoly as leader and a Nash-bargaining model. The model with a Cournot oligopoly as leader delivers the best reproduction of the actual market situation meaning that the dominant players exert market power in a non-cooperative way without profit sharing. Furthermore some methodological clarifications regarding the modeling of markets with dominant players and a competitive fringe are made. In particular we show that the use of mixed aggregated conjectural variations can lead to outcomes that are inconsistent with the actions of rational profit-maximizing players.