Imperfect competition in the international coal industry – does it matter?

The market for coal is of increasing significance in policy discussions on carbon reduction. Because the coal market has become increasingly internationalized, and because of the importance of coal in energy generation for industrial purposes and the limitations and costliness of alternative cleaner technologies, the use of multi-country, multi-sectoral computable general equilibrium (CGE) economic models is very popular for the evaluation of policies. These types of models frequently contain generic market structure assumptions that enhance the general applicability of the models but may limit their value for specific issues. This article evaluates the effects of imperfect competition in the international coal market under the CGE modeling framework. The results generated under various market structure scenarios are very similar, indicating that the structure of the international coal market does not play a significant role in determining the policy simulation outcomes. It can be concluded that coal-related CGE analyses can make use of the simple but robust perfect competition assumption and priority can be given to issues other than the underlying international coal market structure.