Back now with DAY TO DAY. President Bush's energy proposals in his State of the Union speech are worsening the already bad relations between coal companies and environmentalists. The plan could mean bigger government incentives to turn abundant coal reserves into something that cars could run on. MARKETPLACE's Sam Eaton joins us. Sam, how do you do that - how do you do that trick? How can they make coal into, what, gasoline?

SAM EATON: Well, first of all, Alex, it's the demand that could be driving this. The president's proposal would require 35 billion gallons of renewable and alternative fuels to be used in the U.S. within a decade. And ethanol is obviously in the best position to capitalize on that demand, but experts say the corn-based ethanol, which accounts for virtually all of the ethanol that's being produced in the U.S. right now, will top out at around 15 billion gallons. And coal producers are hoping to fill in a big portion of that shortfall by turning coal into diesel. That can then run on cars and trucks.

CHADWICK: Huh. So what's the controversy there?

EATON: Well, the main concern, Alex, is greenhouse gas emissions. Coal is loaded with carbon, which means it produces a lot of the emissions responsible for global warming, both in the conversion process and when it's burned in vehicles as fuel.

Now, the White House wants to create a technological horse race where lots of different alternative fuel options can compete for a share of the market, but the problem is there are two goals at play here that are easily at odds with one another, one of those being energy independence and the other curbing global warming. I talked to Daniel Kammen at U.C. Berkley's Energy and Resources Group, and he says until that changes, coal will have the upper hand.

Mr. DANIEL KAMMEN (University of California, Berkley): The U.S. has the world's largest coal reserve. The Coal Board would love to find a place to use it, and it's easy, it's accessible, and if your only argument is energy security, then coal looks very attractive.

Unfortunately, we're running out of atmosphere much, much faster than we're running out of oil or coal, so we need to make our standard greenhouse gas-based.

EATON: Now, Kammen says the risk of going forward without curbs on greenhouse gas emissions is that high carbon fuels like diesel made from coal and even corn-based ethanol by some estimates will come to dominate the alternative energy fuel market. He says that would leave the U.S. back at square one when it comes to addressing global warming.

CHADWICK: So what needs to happen here?

EATON: Well, the coal industry says the issue can be resolved by pumping CO2 back into the Earth's surface, but environmentalists say that doesn't take care of the car emission side of the equation. They're calling for a cap on carbon dioxide emissions. That would basically put a price premium of fossil fuel-based energy, giving low carbon fuels like cellulosic ethanol the edge in the market it needs.

And coming up later today on MARKETPLACE, with prices for some pieces of art now exceeding 100 million bucks, we'll find out what goes into pricing famous paintings.

CHADWICK: Thanks, Sam Eaton, for public radio's daily business show MARKETPLACE from American Public Media.

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