Earlier last week, an Indian coal group called Abhijeet agreed to purchase nine million tons of coal per year from Kentucky coal producers for the next 25 years. This comes as a sigh of relief to Kentucky’s coal industry – not only given the Environmental Protection Agency’s efforts to put that energy source out of business, but also given the falling price of natural gas due to a new extraction method called hydraulic fracturing.
What does this mean for those passionate about free markets and individual liberty? It means that international free trade works, even for an industry as out of favor with the current administration as coal. It means that no matter the political clout and bureaucratic pandering, if a business creates value for people – even people on the other side of the globe – that business is able to overcome political adversity and enrich people’s lives due to voluntary exchange. In this specific instance, it means coal is a viable energy resource because its benefits to people’s lives outweigh the costs, both the environmental costs and the costs of consuming resources in its extraction.
This deal is beneficial to both Kentucky and India. Because Kentucky coal has a comparative advantage in coal extraction, due largely to its coals’ high energy content, it benefits India to import from our energy sector instead of relying on local coal reserves in neighboring regions. Kentucky is able to profit from its most prized natural resource, while India benefits from being able to free resources to areas where it has a comparative advantage.
Despite the EPA’s war on coal, what we have here is a clear instance of free markets overcoming.