Investors Double Down on Flight From Coal

Oil faces some new pressures and coal is on the outs. Those were two clear messages in the many energy investments and emissions strategies announced at the recent One Planet Summit in Paris.

Consider, for example, these announcements:

1.France’s AXA plans to divest 2.4 billion euros from coal and “completely divest from the oil sands industry and associated pipelines.”
2.ING “has decided to accelerate the reduction of our financing to coal power generation,” and by 2025 will “no longer finance clients in the utilities sector that are over 5% reliant on coal fired power in the energy mix.”
3.Johns Hopkins University will “divest from separately managed investments in thermal coal.”
4.Exxon Mobil Corp. will disclose the effects of climate change on its business, as its shareholders have urged it to do.
5.The World Bank Group said that after 2019, it “will no longer finance upstream oil and gas,” though it made clear it will still support investments in natural gas distribution and natural gas used in transport.

Few of these coal announcements are surprising. Both AXA and ING are merely enhancing earlier commitments to limit their coal investments — albeit with significantly greater financial commitments to divest.

And note that these announcements all concern thermal coal used in power generation, not metallurgical coal (used in steelmaking). Metallurgical coal is a relatively small proportion of total coal production — about a billion metric tons a year out of more than 7 billion metric tons total. While natural gas, renewable energy and greater energy efficiency compete directly with coal-fired power, nothing really competes with coal used in steelmaking.

The coal sector itself is pulling back its future plans. Bloomberg Intelligence’s Rob Barnett has a handy chart showing the capital expenditures in BI’s Global Coal Producers Competitive Index.

There is one place where thermal coal capital expenditures — or at least a plan for it — is still looking up. The massive Carmichael mine in Australia’s Queensland, if it is built, would produce 60 million metric tons a year for six decades.

But building out Carmichael would require first financing the project. In the past few years, Australia’s major banks have steadily pulled back from financing new thermal coal projects. National Australia Bank’s terse announcement on Dec. 14 is just the latest. Four Chinese banks now also have explicitly stated that they will not fund Carmichael. (China Merchant Bank’s one-line statement to Australian advocacy group Market Forces makes NAB’s announcement positively verbose.) Bankers are today’s canary in the coal mine.

This week’s reading

• The San Francisco Bay Area’s transit system commits to 90 percent renewable power by 2021(about as much power as the country of Eritrea consumes).
• Hawaii’s mayors commit to 100 percent renewable ground transportation by 2045.
• A new flexible battery designdraws inspiration from the electric eel.
• The new U.S. defense bill includes “a dire warning on climate change.”
• Beijing’s winter air pollution has improved greatly this year, though it means many are struggling with unheated homes.
• A new study on hydraulic fracturingfinds that “pregnant women living within two-thirds of a mile of a hydraulic fracturing well were 25% more likely to give birth to a worryingly small infant.”
• Southeast Asia’s online populationis now larger than the entire population of the U.S.
• Andrew Ng, formerly of Google Brain and Baidu, has launched Landing.ai, an artificial intelligence company focusing on manufacturing.
• Farm Animal Investment Risk and Return, an investor initiative, asks if regulators will impose taxes on meatsimilar to tobacco and sugar taxes.
• Bloomberg’s Luzi-Ann Javier says that blockchain’s digital ledger technologyis poised to upend global markets for raw materials.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Nathaniel Bullard is an energy analyst, covering technology and business model innovation and system-wide resource transitions.

Source: Bloomberg