Wednesday, October 1, 2014

Divestment from Coal Foreshadows the Fate of All Fossil Fuels

Coal has been steadily declining in value and this fact may foreshadow the fate of all fossil fuels. As more government regulations come online and more assets are divested, coal is becoming increasingly risky and less valuable.

As explored in a Huffington Post article, the stock prices of coal have declined by 67 percent in the past couple of years.

The burning of coal causes air pollution and climate change causing emissions. These are the primary drivers of the decline in coal.

As explained in a March 2014 assessment, "Given the mounting environmental pressure, there is definitely a move away from coal as a power source. Per a report from Industrial Info Resources, active coal mining projects in the U.S. have declined by 39% from 2011 levels. Per the report, there were $12.3 billion worth of active coal projects in 2011, which declined to $7.5 billion in 2013."

While we are still a long way from an end to coal altogether, the future looks grim for investors in this dirty source of fuel. As nations wean themselves off of coal and cleaner forms of energy grow, this will cause a further devaluation.

According to recent EPA data, new power plants are still the largest source of greenhouse gas emissions in the US. More than 1,550 facilities are emitting over 2 billion metric tons of CO2, which accounts for 32 percent of total US greenhouse gas pollution. Power plant emissions have declined by 9.8 percent since 2010, but in 2013 emissions increased by 13 million metric tons due to an increased use of coal.

President Obama’s Climate Plan, followed by the US Environmental Protection Agency's (EPA) new power plant rules will put considerable downward pressure on coal in the US. The EPA’s proposed Clean Power Plan, would decrease carbon emissions from the power sector by 30 percent below 2005 levels.

Even in places like China, which currently uses almost half of the world's coal supplies, the dirty power source is being dumped in favor of cleaner sources of energy. China continues to radically increase its renewable energy investments including a 60 percent increase in its target for total installed solar by the end of 2015.

As coal declines, renewable sources of energy are growing by leaps and bounds. The assessment states, "natural gas and renewables are eating away its [coal's] share at a rapid pace." While natural gas may be a bridge fuel, what we are seeing happen to coal investments will likely happen across the board to all fossil fuels as the renewable energy revolution continues to take hold.

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