Coal is considered the dirtiest of all fossil fuels due to the emissions of hazardous pollutants when burned. But we are at a point where there is a scarcity of energy around the world, oil and gas prices are constantly rising and reaching new highs and energy consumption is showing no signs of slowing down. Nuclear energy claimed to cut carbon dioxide emissions and was promoted as a green source of energy but when pitted against the harmful effects of radiation, coal comes off as the lesser evil.
The most recent figures from the Energy Information Administration shows that the US has the largest coal resources in the world at 486 billion short tons. As of Jan 1st 2010, the EIA estimates that 261 billion short tons is recoverable. Coal is coming back as a cheap and reliable source of energy. Concerns of geopolitical instability in the major oil producing regions of the world is shifting the spotlight to coal as major economies like the US, China and India have large coal reserves and do not need to look beyond their borders.
Over the years there have been technological advances that help reduce the “carbon footprint” of coal and further research is being carried out on an ongoing basis to eliminate greenhouse gas emissions completely. In the US alone coal accounts for 45% of the electricity generated, almost twice the amount of electricity generated from natural gas. Coal production has consistently increased over the last 60 years and will continue to do so mainly due to its abundant existence.
Coal meets 80% of China's energy needs and this is one of the largest drivers of global coal consumption. This is a good time to invest in coal as its use is only going to increase. The US exports more coal than it imports and coal prices have steadily increased over the last decade. Coal stocks have been performing well and one way for investors to make a play in this sector is through Coal ETFs.
Besides the usual benefits that come with investing in an ETF like tax advantages, low costs etc, it also helps to hedge against risk and provides exposure to the coal sector without having to hold several coal stocks as well as an efficient diversification strategy. Clean coal has been an oxymoron for all these years but this may change soon. Under the Obama administration several endeavors are underway for carbon capture and storage.
( Source: www.steelguru.com )