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Global steam coal supply costs in the face of Chinese infrastructure investment decisions

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  • Paulus, Moritz

    ()
    (Energiewirtschaftliches Institut an der Universitaet zu Koeln)

  • Trueby, Johannes

    ()
    (Energiewirtschaftliches Institut an der Universitaet zu Koeln)

Abstract

In this work we demonstrate the effects of different Chinese transport infrastructure investment strategies on long run marginal costs of steam coal supply in Europe. Increasing Chinese demand for steam coal will lead to a growing need for additional domestic infrastructure in China as production hubs and demand centers are spatially separated. If domestic transport capacity is only available at elevated costs, Chinese power generators could turn to the global trade markets and increase steam coal imports. Increased Chinese imports could significantly influence global trade market price levels which would especially affect nations mainly relying on imports, like for example Europe. We analyze the scope of this effect under different assumptions for Chinese transport infrastructure developments. For this purpose, we develop a spatial equilibrium model for the global steam coal market. For our assumption regarding production and transport cost evolutions, we rely on an input factor-based cost calculation methodology. We found out that the investigated Chinese infrastructure decisions have a modest impact on long run marginal costs of supply for Europe and the US but significant effects for China.

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File URL: http://www.ewi.uni-koeln.de/fileadmin/user_upload/Publikationen/Working_Paper/EWI_WP_10-04_Steam-Coal-and-Chinese-Infrastructure.pdf
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Bibliographic Info

Paper provided by Energiewirtschaftliches Institut an der Universitaet zu Koeln in its series EWI Working Papers with number 2010-4.

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Length: 29 pages
Date of creation: 01 Sep 2010
Date of revision:
Handle: RePEc:ris:ewikln:2010_004

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Keywords: Steam coal; MCP; non-linear optimization; China; Europe; transport infrastructure;

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Cited by:
  1. Paulus, Moritz & Trueby, Johannes & Growitsch, Christian, 2011. "Nations as Strategic Players in Global Commodity Markets: Evidence from World Coal Trade," EWI Working Papers 2011-4, Energiewirtschaftliches Institut an der Universitaet zu Koeln.

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