Coal collapse and the first burst carbon bubble
The last few months have seen major bankruptcies among American coal companies and the near-elimination of the market value for the rest over the last 5 years (another Hockey Stick, except mirror-imaged and with the stick part also tilted down). What hasn't changed much is the amount of coal reserves these companies have. To the extent that these companies had been valued based on the reserves they own, usually the major component of their value, then the climate divestment argument that fossil fuel stocks are overvalued by a carbon bubble gets a lot of support. The market appears to be saying that a lot of that coal these companies own is now worthless and will stay in the ground.
I shouldn't overplay that argument as it applies to climate divestment. A number of these companies took on a lot of debt several years ago buying other coal companies (and their reserves) in a bet that there would be a major expansion in coal usage - a bad bet. The low-to-negative valuation reflects that debt in part, not a market assessment that all of their reserves are staying in the ground. OTOH, even before these purchases the coal companies had a much higher valuation, so if you assume that the recent coal acquisition is balanced out by recent debt, you still have to explain why the all the coal owned by the companies from prior years is valued so low.
Some parts of the bankrupt companies are still profitable under current law which allows them to impose pollution costs upon neighbors and the entire planet, so some of their reserves will still get used. We might have a better idea based on the valuation when they emerge from bankruptcy and can see then whether the carbon bubble in coal bounces back.
This is a pretty useful example for climate divestment. Six years ago no one could have predicted it. While natural gas had started its expansion back then, everyone expected unabated demand in China and India. Now it's much more up in the air, and meanwhile the bankruptcy papers are shaking out some interesting connections between climate denialists and previously undisclosed coal funders.
During the years that natural gas got primary credit for driving out coal, the renewable industry grabbed nearly half as much away from coal (see page 3, and good reference on coal's problems in general). That trend can accelerate.
One other question is whether climate divestment played a role in coal's trouble. You hear zero credit given to the movement, which I think is slightly unfair. We're now in a situation where at one point I'm watching a random business cable channel and see a discussion of the carbon bubble, and I think divestment helped highlight that risk to investors. And while I'm no stock expert, I don't see a lot of opportunistic buying of the still-standing companies even though you can get them over 90% cheaper than they used to be - as divestment grows and increasingly focuses on coal, it can help create uncertainty that blocks funding for the companies.
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Why is George Soros buying coal stock?
The five top fuel consuming (and CO2 emitting, for those keeping score) countries are China, the U.S., India, Russia and China will consume about 60% of the world’s energy in 2040 (and account for a similar percentage of emissions. The second five countries account for about 10%, so it really is the top 5 countries that matter.
And each of these five countries has been pursuing (and promoting their pursuit) of green energy sources to the rest of the world. To hear them all talk, green energy is going to take over the world.
However, their planned expansion programs for nuclear, hydroelectric, solar and wind,biofuels and natural gas are not going to do the job.
In fact, if everything that is on the planning boards gets built in those five countries, the percentages of renewable and nuclear energy used will climb from 17% today to 20% in 2040. And that’s if the DOE estimates of fuel consumption (819.6 quads projected for 2040) are correct. If my more pessimistic projections are more accurate our world will be burning about 965 quads by then. And if that energy isn’t coming from nuclear, hydroelectric, renewables or even oil or natural gas… it will come from coal.
Because George Soros is smart.
Tom wrote...
The five top fuel consuming (and CO2 emitting, for those keeping score) countries are China, the U.S., India, Russia and China
Wait a minute, that's only 4 countries, not 5. Unless you count China twice.
Hi John--whoops! Thanks. Fifth is Japan.
Tom, *is* George Soros buying coal? Because I don't think he makes every decision on what happens to his money. Nor do I know why he might have decided to do so. Maybe it's cheap enough that he can just let it go to a nature reserve (this has happened several times with old coal mines in the UK).
And I thought you said he was "in on the scam" of AGW, so why is he trying to make money on fossil fuels?
Or is this going to be another healing level of conspiracy onion?
And what is your obsession with what rich people do with their money? Rich envy?
The collapse of coal is inevitable, even if it were only the result of people thinking that SOMEONE is going to buy coal, even if their country is divesting in it, or becoming more efficient. Because obviously SOME OTHER country is going to be at fault (even if you have to add the all together) because part of the healing delusion is that everyone else needs to change first because they're worse.
See Poland recently, who are against the Paris talks because they have large reserves, so the talks will "impoverish" them. Of course, Poland doesn't need all those reserves of coal, they will be selling to some other country. Whilst complaining that they shouldn't shoulder the burden because everyone else is producing more than Poland, of course.
Hi BP,
Don't ever change. I never wrote "he was in on the scam" of AGW. Either you're thinking of someone else or the mushrooms are getting to you. I know--the two are not mutually exclusive.
I don't believe I've shown much sign of being obsessed with what rich people do with their money--I believe that might be the very first time I've written George Soros' name. Heck, I don't even write much about the Koch Brothers. I do mention Warren Buffet from time to time, although I prefer his brother Jimmy.
As for conspiracy--I'm more of the opinion that stupidity and intellectual laziness is a better explanation. Conspiracy takes work.
As for the 'collapse of coal', your argument never quite reaches the level of coherency, but I guess it's you vs. George Soros--place your bets.
Tom
Please sit down before continuing...
I tend to agree with what you wrote in your first comment. There is far too much irrational optimism about low-carbon energy and that will keep coal on the table for decades to come.
Sorry for the shock.
Here is a hint: There are two kinds of coal, thermal coal used for generating heat and electricity and metallurgical coal used for refining ores. The bottom has dropped out of the thermal coal business.
Tommyrot, as said before: since you are refusing to change, this must be some approval from you as to being accurate true and on point. Hence I am happy to continue being correct, accurate and scathing of your enormous idiocy here. There is no need to continually demand that I continue to accurately eviscerate your bullshit and puncture your overinflated ego.
With that said, did you have ANYTHING AT ALL to add, or just your wussy passive-aggressive attempts at evasion?
"I don't believe I've shown much sign of being obsessed with what rich people do with their money"
So you didn't bother to read up on Soros' activities, nor feel compelled to write uninformed bullshit in your first post there?
Odd. Reality disagrees with you 100% on that point.
Actually, that's kind of your M.O. isn't it?
Tom: Why is George Soros buying coal stock?
BPL: Who the hell cares? Seriously, why should anyone care?
Eli
The bottom has dropped out of the thermal coal business.
Shale gas in the US and China as the global depressant.
It won't last, and there's plenty of industrialisation in the pipeline globally which will be more likely coal-powered than not.
IMO talk about the death of coal is dangerously premature.
This isn't clear; let's have another go:
Shale gas is hurting coal in the US and the slowdown in the growth of the Chinese economy is pushing steam coal prices down globally.
Germany is cutting back and rolling out more and more renewable. China doing even more of that.
The purchases and pricing were predicated on that hoary old "WE don't have to do anything because if we DID, CHINA would just get cheap stuff!!!!".
Appears that the Chinese government is far less corrupt and self serving than many of the loudest mouths that purport to be speaking for The Free World...
China is thoroughly corrupt. Don't believe their coal statistics--ever.
Germany has been opening brown lignite mines as they close down their nukes.
Don't people read any more?
China is thoroughly corrupt. Don't believe their coal statistics--ever.
Germany has been opening brown lignite mines as they close down their nukes.
Don't people read any more?
China is thoroughly corrupt. Don't believe their coal statistics--ever.
Germany has been opening brown lignite mines as they close down their nukes.
Don't people read any more?
"China is thoroughly corrupt. Don't believe their coal statistics--ever."
They're a hell of a lot less corrupt than the USA, though. They're not trying to squeeze some more growth out of a dead industry through coordinated denial and political chicanery to the detriment of their citizens.
It's VERY easy to check their coal statistics: someone NOT china is selling them the coal.
You're just running the same tired old "Reds under the bed" you felt so comfortable with (if there's an absolute monster, then by fighting it YOU'RE THE HERO!!! Even if you're a multiple murderer, rapist, arsonist, burglar and homicidal maniac).
China are, by the standards of those not IN China (who are the only ones who have a say in whether they should continue to have the government they have: and the popular idea is that they do want it, not everyone, but those aren't the majority), among the better of the countries of the world, handily beating the USA in almost all statistics of international amity and reason.
"Germany has been opening brown lignite mines as they close down their nukes."
Nope. They are shutting down plans they had to build new coal plants that were arranged BEFORE they shut down their nuclear plants, and are still closing down the plants they were supposed to replace. The ones they are building are REPLACING older and less efficient (or deteriorating) coal plants.
Then again, tom fullerthanadunnywagon, you're full of it, and it's patently obvious why.
Environmentalism is like communism and therefore must NEVER, EVER, BE RIGHT.
Tom: China is thoroughly corrupt. Don't believe their coal statistics--ever. // Germany has been opening brown lignite mines as they close down their nukes. //Don't people read any more?
BPL: So if I understand you correctly, China is thoroughly corrupt, we should not believe their coal statistics--ever, and Germany has been opening brown lignite mines as they close down their nukes. Do I have that right?
No, no, no. You don't understand, BPL, you aren't reading! Tom Fullerthanadunnywagon has told you! DIDN'T YOU READ IT!!! It PROVES nobody reads anymore!
James Hansen commenting on US climate policy:
“We have two political parties, neither one of which is willing to face reality,” said Hansen, who now heads up the Climate Science, Awareness and Solutions Program at Columbia University. “Conservatives pretend it’s all a hoax, and liberals propose solutions that are non-solutions.”
Clinton’s outline would put the US on track to supply 33% of the country’s electricity needs through renewables by 2027. That’s a mere 8% improvement over Obama’s plan.
It’s not enough, according to Hansen. Renewables are a part of how the US will wean itself off fossil fuels, but the market has to be allowed to determine which combination of renewable fuels – not just solar – makes the most sense in each region. “You can’t just legislate that,” said Hansen. Clinton’s plan “is going to make energy more expensive. You need to let energy efficiency and renewables and nuclear power and anything else that comes up compete.”
Hansen emphasized that whatever domestic policy we adopt towards climate change has to have a global reach, a key point absent in the solar proposal. “In places like China and India, they have to move off of coal for electricity pretty rapidly or the world is screwed.”
Hansen said a credible candidate on climate change would be talking about policy that would allow the price of fossil fuels to rise gradually. “You have to recognize that as long as fossil fuels appear to be the cheapest energy, we’ll just keep burning them,” he said.
And that's just the US.
Incidentally, I hope any free market enthusiasts in da house note that Hansen is on-message:
“You can’t just legislate that,” said Hansen. Clinton’s plan “is going to make energy more expensive. You need to let energy efficiency and renewables and nuclear power and anything else that comes up compete.”
What more could you want from an 'alarmist' than a direct appeal to let the market sort it out?
FWIW (not much), Soros made token investments in two coal companies. The guy knows how to go all in, and he very much didn't do that on coal.
"Billionaire climate philanthropist George Soros invested more than $2m (£1.3m) in struggling coal giants Peabody Energy and Arch Coal in recent months, despite having once called the fuel “lethal” to the climate.
Filings with the Securities and Exchange commission show that between April and June this year Soros Fund Management (SFM) bought more than 1m shares in Peabody ($2.25m), the world’s largest private coal company, and 500,000 shares in Arch ($188,000).
The firm, which Soros chairs, bought the large stakes for bargain prices. Peabody and Arch are giants of the US coal sector but have suffered massive declines in recent years, losing more than 98% of their value. SFM made a similar move in 2014 by investing $234.4m in coal and gas company Consol. Those shares were sold off after a few months as gas prices continued to fall."
http://www.theguardian.com/environment/2015/aug/19/climate-philanthropist-george-soros-invests-millions-in-coal
More obsession and denial of same from you again, Tom.
How unsurprised that your acceptance of the power of wealthy people and the accrual of wealth depends on that person accepting your political ideology.
Only "the right people" allowed wealth. The "wrong thinkers" must be hounded and persecuted for doing what they want with their money. But ANYTHING done by the "right sort" with THEIR money should never be discussed negatively or that is "envy".
Do you know what "two faced hypocrisy" is, tom? You've got it all over you.
Have you been recently bitten by an unusually aggressive bat and/or squirrel, BP?
In either case, don't ever change.
Tom Fullerthanadunnywagon, have you ever bothered to apply your brain to thinking?
Or have you just been insane all your life?
"don't ever change."
What is the point of you saying that, Tom Fullerthanadunnywagon?
Please answer. What does it mean? What does "don't ever change" mean because it is, at the moment, entirely 100% meaningless to me and has always been so.
What do you mean when you tell me "don't every change"?
Or is this some mental tic you cannot control like tourette's or spasms?
BPL:
"Tom: China is thoroughly corrupt. Don't believe their coal statistics--ever. // Germany has been opening brown lignite mines as they close down their nukes. //Don't people read any more?
"BPL: So if I understand you correctly, China is thoroughly corrupt, we should not believe their coal statistics--ever, and Germany has been opening brown lignite mines as they close down their nukes. Do I have that right?"
Tom has said it thrice, and what he tells you three times is true!
BTW, you owe me a new keyboard, BPL 8^D!
Tom Fullerthanadunnywagon hasn't managed to work out a way to reply, you notice. He's off elsewhere claiming that since HE isn't killed off by a heatwave, it's had no effect on humanity. Because he doesn't understand there are other people on the planet.
As I said, Soros made a token investment. Tom provided the details. At that level I wonder if Soros even knew about the investment as opposed to giving some flunky a little play money to use in his behalf.
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