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Coal is booming -- just not in the U.S.

(MoneyWatch) "King Coal" may be on the retreat in the U.S., but it is on the march elsewhere around the world.

Domestic coal production has fallen sharply in recent years amid intense pressure by environmental activists, increased competition from natural gas and stiffer federal regulation. In only the most recent example of coal's blackened reputation in the U.S., Los Angeles officials said this week that they are moving ahead with a plan to make the city coal-free by 2025, winding down the city's investment in one coal-burning plant in Arizona and shifting another one in Utah to natural gas.

But if the coal industry is on the defensive stateside, the picture abroad looks very different. While coal demand in the U.S. is shrinking, it is growing just about everywhere else, rising more than 4 percent globally in 2011 (the latest year for which figures were available), according to the International Energy Agency. Driving most of that demand: economic growth in China, which is by far the world's largest producer and consumer of goal, and in other emerging markets, along with a major, if perhaps temporary, rebound in coal usage in Europe.

By that measure, coal is becoming more important, not less, ranking behind only oil in terms of total global energy consumption.

U.S. Energy Information Administration

"The world will burn around 1.2 billion more tons of coal per year by 2017 compared to today -- equivalent to the current coal consumption of Russia and the United States combined," said IEA executive director Maria van der Hoeven last year. "Coal's share of the global energy mix continues to grow each year, and if no changes are made to current policies, coal will catch oil within a decade."

The organization predicts that coal will be the most widely used fuel by 2030, as developing countries build out their electricity infrastructures to accommodate swelling populations. Indonesia is today the globe's largest exporter of coal, while the industry is also expected to boom in India, which has large coal reserves. More than 1,100 coal-fired power plants are in some stage of development around the globe, according to environmental advocacy group the World Resources Institute.

In the U.S., producers are benefiting from higher exports, but it's not enough to offset the slumping consumption at home. The boom in gas extracted from shale has pushed down prices and made coal less competitive as an energy source. Total U.S. consumption of coal in the third quarter of 2012 was down roughly 9 percent from the year-ago period, according to the U.S. Energy Information Administration (EIA).

More broadly, the American coal industry has been shrinking for decades, a trend that experts think will continue. At least 100 coal-fired plants are scheduled to be shut down, while the amount of coal-fired electricity the U.S. produces as a share of total generation its at its lowest level since the early 1970s.

Fitch Ratings expects 2013 to be another tough year for coal producers. A domestic coal glut, especially in "metallurgical" coal used in steel plants; economic weakness in Europe; and rising production costs are putting increasing pressure on coal suppliers, the credit rating agency said in a recent report. Stricter environmental regulation could eliminate more than 5,000 gigawatts of coal-fired capacity by 2012, Fitch said.

Utility giant American Electric Power announced in February that it would close three coal-fired plants, while in 2012 Patriot Coal, a St. Louis producer with mines in Kentucky and West Virginia, went bankrupt. Other distressed industry players include James River (JRCC) and Xinergy (XRG). 

Large coal companies such as Alpha Natural Resources (ANR) and Peabody Energy (BTU) are tapping into the burgeoning demand overseas, especially for so-called steam coal used to run power plants. U.S. coal exports reached a record 126 million tons last year, approximately double the figure in 2009 and 12 percent more than the previous peak in 1981, according to the EIA. 

And despite the actions of Los Angeles and utilities that are ditching coal, the U.S. coal market still remains huge. "The U.S. will continue to burn coal, so it's not dead," said Monica Bonar, an analyst with Fitch Ratings. "It's still 30 to 50 percent of our power generation. Even with the declines in consumption that are expected, it won't go down to zero, as a lot of coal producers explore additional markets abroad."

Those markets include countries like Germany, The Netherlands and the U.K., which have strong environmental movements. One reason for the apparent discrepancy -- these nations remain well behind the U.S. in hydraulic fracturing, or "fracking," the extraction technology behind the shale-gas boom in the states. With global oil prices high and ongoing public anxiety over nuclear power, coal remains important in Europe.

"Thanks to more regional integration in coal markets, European coal prices have been more responsive than gas prices, bringing coal back to Europe," the IEA said in a recent report.

Of course, favoring one energy source over another -- fracking over coal, say, and vice versa -- always involves  economic, political and environmental tradeoffs. If the U.S. pullback from coal may cut down on the estimated 13,000 deaths per year from people breathing in polluted particles, fracking produces methane, a potent greenhouse gas linked to global warming, while concerns have been raised about chemicals used in the process contaminating ground water.

It may be a case of picking your poison.

For now, China has, as coal plants continue to sprout nationwide. At the same time, the country now finds itself the world's leading producer of greenhouse gas emissions. The air quality in many of its cities, including the capital Beijing, is notoriously bad, with some areas literally coated in soot and other particles. That has forced Chinese leaders of late to publicly acknowledge such environmental concerns.

Even beyond dirty air, environmentalists say that coal plans don't deliver the benefits touted by producers.

"One of the reasons no one is building coal plants in the U.S. is that it's too expensive," said John Coequyt, director of the international climate program at the Sierra Club. "It's also true that in developing countries, when you add that the international market for coal fluctuates a lot, that electricity from coal is very expensive even without pollution-control equipment."