Eco-laws and the rise of cheap energy fan slow burnout of coal

NEW YORK — Coal is in trouble, and that could be good news for a warming world.

Representatives of about 200 nations, gathered in Paris to discuss ways of limiting climate change by cutting greenhouse gas emissions, will be talking a lot about coal.

The International Energy Agency recently referred to the phasing-out of inefficient coal-fired power plants as among the biggest and most cost-effective ways to reduce greenhouse gas emissions. Burning coal produces nearly twice as much carbon dioxide as natural gas, according to the US Energy Information Administration.

Meanwhile, a half-dozen major coal firms have been hit by bankruptcy, including Alpha Natural Resources, which sought bankruptcy protection in August. Arch Coal warned last month that a filing could come soon.

In the US, environmental regulations such as the Clean Power Plan are only part of the industry’s challenges.

The rise of cheap alternatives such as natural gas, as well as wind and solar power, have had a far greater effect on coal’s fortunes. Plummeting coal prices and business decisions by the companies to take on debt have also weighed down the industry. In addition, campaigns by well-funded activists have helped to reduce the number of coal-burning plants in the US.

Investors have responded by abandoning coal stocks, and many institutions — including California’s biggest pension plans and Norway’s sovereign wealth fund — have found it easy to drop underperforming coal holdings.

The German insurance giant Allianz said last month it would eliminate coal from its nearly 2-trillion portfolio, and invest heavily in renewable energy.

These trends were good news for the environment, said Tom Sanzillo, director of finance for the Institute for Energy Economics and Financial Analysis, an environmentally focused research group funded by the Rockefeller Family Fund and other philanthropies. “It looks better than it was on the climate issue by reason of market forces.” He co-wrote a recent report that suggested that thermal coal, which is used in power generation, peaked globally in 2013 and is expected to decline as much as 4% this year.

But bankruptcy did not mean the end of a company, said Anthony Yuen, a global energy strategist with Citi Research. “The asset’s still around; the coal is still in the ground.” So, when a company goes through restructuring, “it might actually clean up their balance sheet”.

Even so, coal is under pressure in many parts of the world, in no small part because many countries want to limit the greenhouse gases and smog that coal-burning plants produce.

The US Energy Information Administration reports that China’s coal consumption continues to grow, although the rate of growth has slowed and the country has committed to reductions over time.

The Institute for Energy Economics and Financial Analysis, on the other hand, suggested in a recent report that the nation’s coal production, consumption and importation “likely peaked” in 2013, with further declines ahead.China’s agreement with the Obama administration to reduce its coal consumption is part of a long-range trend of diminishing need for coal, said Mr Sanzillo, an author of the Chinese coal report. “Nobody believes these cycles are coming back,” he said. You’ll have a smaller coal industry, in the United States and all over the world.

“Coal use is not dropping off in all parts of the world, however. Consumption in India will continue to rise for some years to come, though it has also pledged to expand its use of renewable and nuclear energy production as well. And the use of coal in Indonesia and much of the developing world is expected to rise.

“Coal isn’t going anywhere,” said Benjamin Sporton, chief executive of the World Coal Association. “In our view, coal is going to play a very big role in the world’s energy mix, and is going to continue to do so for many decades to come.”Nevertheless, said Hal Harvey, chief executive CE of Energy Innovation, a policy research group, said that even though countries will continue to burn a lot of coal, the broader trend of coal’s decline is clear. “It’s not whether, but when.” he said.

Over time, new technologies for renewable energy wouldwill become cheaper and more efficient, he said, in a familiar “virtuous cycle” that creates jobs and builds new industries, leading to further advances.The deployment of renewable energy has already grown so sharply, he noted, that some US states whose political leaders oppose the Obama administration’s Clean Power Plan might well find themselves in “accidental compliance” as their use of renewable energy reduces the need for burning fossil fuels.




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