Do not ask for whom the bell tolls; it tolls for clean coal.

But dirty coal is doing just fine, thank you very much.

The U.S. government (and a number of other Western world governments) are in the habit of subsidizing energy initiatives. These efforts have met with varying levels of success. Germany, for example, has managed to kick off a solar energy frenzy with its green policies. And here in the United States, we know all about ethanol.

Along with the boondoggle that is ethanol, Uncle Sam had planned to throw a few billion at “clean coal” technology through a project called FutureGen. (The name sounds like it was picked by a die hard Star Trek fan.)

The goal of FutureGen was to develop a “next generation” clean coal power plant as a prototype. This plant would then serve as a model for 21st-century coal plants in other countries, including China.

The problem is, the tab for FutureGen just got too expensive. (The coal industry has clout in Washington, but nowhere near as much clout as the American farmer.) Earlier this month, the Bush administration decided to kill FutureGen when the price tag nearly doubled to $1.8 billion.

The coal industry -- which includes producers and end-user utilities -- is not happy about the death of FutureGen. They see the writing on the climate change wall. The truth or fiction of global warming is almost irrelevant in their calculus; either way, the political tide is turning against big-league C02 emitters. This puts more pressure on existing coal plants, while making it harder for new ones to get built.

FutureGen was also great for the public relations department. Coal producers and coal-scarfing utilities could speak warmly of it in their press releases and annual reports. Without this set of green talking points, Big Coal loses ground to Big Nuclear. Radioactive waste is no picnic, but it doesn’t contribute to climate change.

Coal Is Still King

In the bigger picture, though, old king coal is doing just fine. Check out these statistics from the World Coal Institute.

According to the WCI’s most updated numbers, coal still represents a full quarter of the world’s energy consumption. For world electricity consumption, the share is a whopping 40%.

More than half of America’s electricity comes from coal. In China and Australia, the totals are closer to 80%. In Poland and South Africa, the totals are over 90%.

A Sooty Addiction

We’re all coal addicts; most of us just don’t realize it. In 2006, I illustrated that truth with this example:

For perspective on how much physical coal the world eats up, consider that the electricity required to power a single 100-watt light bulb, left on 24 hours a day, would consume 714 lbs of coal over the course of a year. Most of us don’t leave our lights on round the clock, but we do tend to have many going simultaneously (never mind all the other doodads and gizmos around the house).

Without coal, we quite simply wouldn’t be where we are today. The problem is that the more coal we use, the more we jeopardize our future. This is true not just in terms of climate change, which some harbor doubts on, but plain old pollution too.

Everybody Pays

This is particularly true in developing world countries, where pollution is slowly poisoning the urban populace. Birds have been known to drop dead over Mexico City, suffocated by an envelope of smog. The skies over Moscow and Beijing are sometimes dark gray at noon.

And it’s not just the locals that pay. Everybody pays. China’s pollution is distributed to the four corners of the earth by trade winds. The sooty particulates from antiquated coal plants powering Beijing can be found gumming up air filters as far away as California.

Now we get to the funny part. You know what the real rub is -- the real punch line to this little joke?

Only this: For all coal’s nasty side effects, the stuff is at least supposed to be cheap. America has been called “the Saudi Arabia of coal.” Other countries (like China) have huge deposits also. We’re supposed to pay for our coal addiction with pollution woes, not jacked-up prices.

But now, like seemingly every other commodity in the known universe, cheap coal is getting expensive, too. Consider this news from The Wall Street Journal:

China has long been a huge supplier of coal to itself and the rest of the world. But in the first half of last year, it imported more than it exported for the first time, setting off a near-doubling of most coal prices around the world. The capper came in late January when a winter of punishing snowstorms and power shortages led Beijing to suspend coal exports for at least two months.

Just since then, Asian prices have shot up an additional 34%. Last week, coal benchmarks hit all-time highs in the U.S., Europe and Asia. That's adding to worries over global inflation already stoked by rising prices for everything from crude oil to cattle feed.

We’re Running Out of What?

Every once in a while, a fact or an anecdote or a statistic hits you right between the eyes. Sometimes a megatrend is simply too big to see all at once; it’s so all-encompassing that your brain can’t quite take it in. But then suddenly, when the right puzzle piece falls into place, reality blows you away with its magnitude.

This news does that a little bit for me. We’ve all heard about the commodity super cycle. Some of us (like yours truly) have been writing about it -- and helping readers profit from it -- for years. But still. Coal? We’re running out of coal now?

Oil, fine. Wheat and platinum and uranium and natural gas and water, fine. But, pardon my French, freaking coal? The stuff that runs miles deep in the nooks and crannies of seemingly half the industrialized countries on the planet?

To borrow a quote from Blazing Saddles, What in the wide, wide world of sports is a-goin’ on here?

The Mother of All Bottlenecks

What’s going here isn’t about exhaustion of supply, of course. It’s about yet another extraction bottleneck. It’s about demand running away with such speed and force that supply just can’t keep pace. As with the world’s diminished oil reserves, it doesn’t matter how much coal is in the ground if we can’t get it out of the ground fast enough.

One wonders, Could the world be headed for South Africa’s fate? Two weeks ago, The New York Times ran a piece entitled “Power Failures Outrage South Africa.”

The gist of the story is that ramping electricity demand has completely swamped Eskom, the country’s hapless power provider. The scary part is that this problem didn’t develop overnight as a result of some natural disaster; the wheels for this debacle were set in motion 10 years ago. The New York Times had this to say:

The predicament was foretold. In 1998, a government report warned that at the rate the economy was growing, the nation faced serious electricity shortages by 2007 unless capacity was expanded. The government, led by President Thabo Mbeki, who assumed office in June 1999, tried unsuccessfully to induce private investors to build additional power plants. Only belatedly did it permit Eskom to begin the necessary expansion.

“The president has accepted that this government got its timing wrong,” Alec Erwin, the public enterprises minister, said last Friday at a much-anticipated news briefing that broke a mystifying public silence.

As a result of bad planning, South Africa is now enduring sustained chaos. They’ve got the Full Monty: vital mines shut down, dead traffic lights and mile-long snarls of angry drivers, air conditioners dormant, wide-scale brown outs and even blackouts, businesses driven to failure due to loss of perishable goods… And they knew 10 years ago that this could happen, that rising demand could lead to this very spot, and now there is very little they can do. Eskom can build new plants as fast as it can -- running flat-out -- and it looks like South Africa will have at least another five years of these shortages.

And meanwhile, in just a wee bit of foreshadowing for the rest of the world, we’re running low on coal of all things. Coal. In addition to seemingly everything else, coal. The cursed-yet-blessed stuff that has been endlessly abundant since the dawn of the industrial revolution.

The mind boggles.

Warm Regards,

JL