Coal

Jay Gottlieb

This chapter provides the risk-management professional with an orientation for understanding this oldest and oddest of energy markets. The chapter explains the physical characteristics of coals, coal market structure and dynamics, and the coal price indices and trading venues used for transacting financial derivatives. The chapter covers key developments in the fundamentals of coal, along with an understanding of the broad range of instruments available to manage risk in that market. It will provide a picture of market drivers and their interaction, and examine the beginnings of a reference for detailed data needed for analysis of the coal market.

OVERVIEW

Coal seems to be the unwanted stepchild of the energy world: dirty, old-fashioned, not really used any more. Who cares? Or, often those that care a lot seem to echo the now famous words of a White House Adviser on Energy and the Environment (Blake 2015):

A Harvard University geochemist who serves as a scientific adviser to President Obama is urging the administration to wage a “war on coal.”

“The one thing the president really needs to do now is to begin the process of shutting down the conventional coal plants,” Daniel P