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What the market is telling us about coal

Dan Farber, professor of law | August 13, 2015

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.

train with coal

Coal cars in Ashtabula, Ohio. (via Wikimedia Commons)

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 percent 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.

Coal is 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.
Cross-posted from the environmental law and policy blog Legal Planet.

Comments to “What the market is telling us about coal

  1. Dan, the greatest tragedy today is the fact of life that we continuously fail to join together to protect quality of life and the long-term future of the human race as our highest priority.

    Posts on this blog keep proving that fact as climate changes, violence and inequalities keep getting further out of our control.

    Do you and your UC colleagues see any solutions to this most destructive failure in human nature?

  2. Hopefully the new generation that is coming up is being educated to comprehend that environmental issues are global issues.

    And hopefully this new generation will articulate that coal is a global issue because it is probably too late for the older generation generally to understand that important environmental issues are present beyond the U.S./ Washington D.C.

    Berkeley Earth (not associated with UC) has just released a study that found that 4,000 deaths per day in China are attributable to air pollution and in particular to the massive use of coal.

    And what’s perhaps most horrifying in the study: “92 percent of China’s population experienced at least 120 hours of unhealthy air during the April 5, 2014, to Aug. 5, 2015” year.

    It is so important for the new generation coming along to not just wear America-centric “glasses” like the older generation, but to have a broad vision and articulate the horrible environmental issues that are occurring globally.

    • Dave, the greatest threat to our civilization is that we have absolutely no world leaders capable of making the right things happen in time, and the failures of the United Nations prove continuously that this is a leaderless world we live in today.

      History proves that we need something like WWIII to produce successful leaders like Churchill and Roosevelt and at the rate things are going with climate changes, our civilization is declining and falling at an increasing exponential rate, based on the Keeling curve.

      We have not only failed to learn from the lessons of history, since WWII we have failed to try to protect future generations from our failures to learn from history, with no social, political, economic and/or scientific leaders in sight to protect us from ourselves that we are willing to believe in.

      • Winston Churchill got a pretty good hatchet job on this blog earlier this year:

        “Churchill was more responsible than any other Briton for the direction of a war that ended later and more expensively than needed, leaving most of Europe under the heel of one of the two great autocracies that had started the war in the first place (the Soviet Union), and leaving Britain bankrupt and beholden to allied and imperial creditors.”

        Curious why you did not comment?

        • Dave, this is another case that proves history is a very controversial subject, and I am not a historian. However, there is no doubt that Hitler was insane, so Churchill (along with Roosevelt) was in the right place at the right time to end Hitler’s destruction.

  3. Dan, if we had heeded President Eisenhower’s grave warning in his 1961 Farewell Address we wouldn’t be experiencing so many climate change threats today:

    “The prospect of domination of the nation’s scholars by Federal employment, project allocations, and the power of money is ever present – and is gravely to be regarded.”

    Do we have the leadership to build the right energy sources in time?

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