Markets in the Air: How Commodity Prices and Air Quality Interact

by | Sep 7, 2026

Commodity markets are usually discussed in terms of prices, supply, demand, and global trade.

But commodities also have an environmental dimension.

Coal, natural gas, crude oil, gasoline, grains, and marine fuels are physical products whose production and use can directly affect air pollution. At the same time, air quality itself can influence the productivity and value of agricultural commodities.

The relationship works in both directions.

Changes in commodity prices can alter which fuels are burned and how much pollution is produced. Air pollution can reduce crop yields. Environmental regulations can also reshape demand for particular fuels and create entirely new commodity-market pressures.

Energy Prices Can Change Which Fuels Power the Grid

Electricity generators constantly respond to differences in fuel costs.

Coal and natural gas are both major commodities, and changes in their prices can influence which power plants are economically attractive to operate.

This became particularly visible in the United States during 2025.

Natural gas prices increased substantially from the previous year. According to the U.S. Energy Information Administration, natural-gas-fired electricity generation declined while coal generation increased.

Coal and natural gas do not produce identical emissions.

Coal combustion can generate sulfur dioxide, nitrogen oxides, particulate matter, mercury, and other pollutants. Modern pollution-control systems remove much of these emissions at regulated power plants, but coal remains one of the more emissions-intensive electricity sources.

Natural gas produces very little sulfur dioxide during combustion and generally creates less particulate pollution than coal, although gas-fired plants still emit nitrogen oxides and other pollutants.

This means a commodity price movement that changes the mix of fuels used for electricity can also change the emissions profile of the power sector.

The market is not directly “deciding” air quality. Instead, fuel prices influence operational decisions that have environmental consequences.

Natural Gas Prices Provide a Recent Example

For much of the past two decades, relatively inexpensive natural gas helped displace coal in U.S. electricity generation.

That transition contributed to large reductions in sulfur dioxide and other power-sector emissions.

But commodity relationships can reverse temporarily.

EIA reported that average U.S. natural gas prices increased sharply in 2025 compared with 2024. In response, natural-gas-fired generation fell by about 3 percent while coal generation increased by approximately 11 percent.

Solar generation also increased significantly, preventing the change from being a simple one-for-one switch from gas back to coal.

The episode demonstrates why air emissions from the electrical grid can be influenced by commodity economics even without a change in environmental law.

Fuel costs affect which generators operate most heavily, particularly when electricity demand is high.

Air Pollution Can Affect Agricultural Commodities

The relationship also works in the opposite direction.

Air quality can affect the supply of commodities themselves.

Ground-level ozone is particularly important for agriculture.

Unlike the protective ozone layer high in the atmosphere, ground-level ozone is a pollutant produced through reactions involving nitrogen oxides, volatile organic compounds, and sunlight.

Ozone enters plants through microscopic openings in their leaves.

Once inside, it can damage plant tissues, interfere with photosynthesis, reduce growth, and decrease crop yields.

Soybeans, wheat, cotton, and other economically important crops are sensitive to ozone exposure.

Research examining U.S. corn and soybean production over several decades has estimated measurable yield losses attributable to ozone pollution.

Those losses matter beyond the farm.

Corn and soybeans are internationally traded commodities used for food, animal feed, biofuels, vegetable oils, and industrial products. Reduced yields decrease the amount of product available from a given acreage.

Many factors determine commodity prices, including weather, international production, inventories, transportation, currency markets, and demand. Ozone is therefore only one influence among many.

But the connection is real: atmospheric pollution can physically reduce the production of goods traded in commodity markets.

Air-Quality Rules Can Reshape Fuel Markets

Regulation provides another connection between air quality and commodities.

One of the clearest examples occurred in the international shipping industry.

Large ships historically burned heavy fuel oils containing relatively high concentrations of sulfur.

When burned, that sulfur produces sulfur oxides, which contribute to particulate pollution, acid deposition, and respiratory health concerns, particularly near ports and heavily traveled shipping routes.

The International Maritime Organization introduced a global rule in 2020 reducing the maximum sulfur content of most marine fuel from 3.5 percent to 0.5 percent.

Even stricter limits apply within designated Emission Control Areas, including waters along portions of the United States and Canada.

The regulation changed demand across petroleum markets.

Ships increasingly required very-low-sulfur fuel oil, marine gas oil, alternative fuels, or exhaust scrubbers that allowed vessels to continue using higher-sulfur fuels while removing sulfur compounds from their exhaust.

Refineries had to adjust production and blending strategies to supply compliant fuels.

In this case, an air-pollution rule directly altered the characteristics of a globally traded commodity.

Cleaner Air Can Change the Value of a Barrel of Oil

Crude oils are not chemically identical.

Some contain more sulfur than others.

Historically, high-sulfur crude oils and heavy refinery products could be particularly useful for producing inexpensive marine bunker fuel.

Stricter sulfur requirements changed the economics of those materials because refiners and ship operators had to remove sulfur, blend fuels differently, install pollution-control technology, or use different petroleum products.

This illustrates an important feature of commodity markets.

Environmental regulation does not necessarily reduce demand for an entire commodity. Sometimes it changes which grade or composition of that commodity becomes more valuable.

The same principle appears in coal markets, where sulfur content can influence how desirable a particular coal is for power plants operating under emissions requirements.

Commodity Markets and Air Quality Are Linked Through Physical Activity

Financial markets may make commodities appear abstract.

A barrel of oil becomes a price on a screen. Natural gas becomes a futures contract. Corn becomes a market quotation.

Behind every price, however, is a physical material that must be extracted, transported, processed, burned, or grown.

Those activities interact with the atmosphere.

Higher natural gas prices can change which power plants operate. Ozone pollution can reduce crop production. Sulfur regulations can restructure the global marine-fuel market.

None of these relationships means commodity prices alone determine air quality.

Environmental regulations, weather, pollution-control equipment, technology, electricity demand, and many other factors matter as well.

But commodity markets provide an important reminder that air pollution is connected to economics.

When the price or specification of a major physical resource changes, the effects can travel far beyond financial markets—and sometimes into the air itself.

References