What the Market Is Telling Us About Coal
Dump your coal stocks while you still can!
The market’s message is simple: coal’s day is ending. Three major coal companies (Alpha Natural Resources, Walter Energy, and Patriot Coal) have gone into bankruptcy. The two largest publicly traded companies (Peabody and Arch) are now trading for a dollar a share, down from $16 and $33 within the past year. They, too, may well face bankruptcy. This doesn’t mean that production is going to end, though current shareholders are likely to get wiped out and the creditors will take a haircut. But it does tell us that the market sees industry decline in the future.If I were one of those guys on CNBC, I’d be yelling Sell! Sell! Sell!
The market’s view of coal is well founded. Electricity production from coal has fallen by 25% since 2007. Not coincidentally, U.S. carbon emissions from the electricity sector have also been declining since then. Wind and solar have recently taken off as energy sources, but that’s not the main reason for the decline — it’s natural gas. (And by the way, for those who say the government can’t pick winners, an important recent paper shows that federal funding was crucial in the development of this technology.) Notably, the decline of coal has had little or no effect in consumer prices, despite all the talk about coal’s advantages as a cheap fuel.
The fact is that coal is a really lousy energy source. It’s a major source of particulates that continue even today to cause thousands of deaths a year; it’s dangerous for works and has left enormous numbers with black lung disease; mining itself is environmentally destructive; and yes, it’s also the leading source of carbon emissions. It’s not even a big source of employment anymore– there are now more jobs in wind power. It’s true that there’s still a lot of coal in the ground, but as the saying goes, we didn’t start driving cars because we ran out of horses.
In short, coal just isn’t a sensible modern energy source. It’s time to move on.
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About Dan
Dan Farber has written and taught on environmental and constitutional law as well as about contracts, jurisprudence and legislation. Currently at Berkeley Law, he has al…
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Wow, you so easily condemn people to hardship. Coal is essential to human survival globally, in the near term – as in, the rest of this century.
Coal is the second source of primary energy (roughly 30%) globally, and is mostly used for power generation (over 40% of worldwide electricity is produced from coal). In addition, coal is used to produce virtually all the non-recycled iron. Coal is abundant, affordable, easy to transport, store and use, free of geopolitical tensions.
Today there are 1.3 billion people across the globe without access to electricity. Affordable, secure and reliable electricity supply enables economic development which is a prerequisite for poverty alleviation.
Coal directly provides more than seven million jobs worldwide and supports many more millions. Coal production is the key economic activity in many communities. In 2010 the coal industry invested more than US$7 billion in capital expenditures in developing countries.
From providing employment, export and royalty revenues through to local services and the development of infrastructure, coal mining makes a substantial contribution to improving the livelihoods of many.
Coal-based electricity is widely-established and highly reliable and always available, unlike solar and wind power.
Anyone who says it is time to move on from coal, is not concerned about human well-being.