Climate hawks must realize that bankruptcies aren’t the way to a lower-carbon future.
Climate hawks have been gleeful over the trend of big U.S. coal companies filing for bankruptcy. Patriot Coal filed for Chapter 11 in May, Walter Energy sought protection in July, and Alpha Natural Resources succumbed in August. And it makes sense: A financially unviable coal industry could be a big step in the movement toward a lower-carbon future.
A report this month by Taylor Kuykendall and Hira Fawad at SNL Energy found that roughly “10.4% of all the coal produced in the U.S.” in the second quarter of 2015 came from companies that have filed for bankruptcy protection. “In Central Appalachia, 37.5% of the coal mined in the quarter came from mines that were owned or operated by companies that have filed for bankruptcy since 2012,” they write.
But coal haters shouldn’t be too gleeful at this spate of bankruptcies. While some mines are being idled, they’re not being shuttered en masse. The financial failure of many coal companies, by itself, won’t necessarily bring about a low-carbon future—and for particularly Americans reasons.
Coal production is falling in America—just not by quite the amount you would expect given the financial stress hitting the industry.
According to Bloomberg Intelligence, the number of working coal mines in the U.S. has fallen nearly 40 percent in the past 10 years.
But those that remain open are still quite productive. According to the Energy Information Administration, total annual coal production fell about 14 percent between 2008 and 2014. In the first seven months of 2015, production is down only 8 percent from the first seven months of 2014.
The slightness of these declines tells us that the market for coal is very different than the market for coal stocks and securities. While nobody wants to buy the publicly traded shares of coal companies, plenty of people still want to buy coal for industrial use.
As this chart shows, use of coal in the electricity sector, which accounts for about 92 percent of total U.S. coal consumption, fell by about 14 percent in the first five months of 2015 compared with 2014—largely because power plants are switching to cleaner-burning and cheaper natural gas. But although the market for coal stocks has contracted sharply, coal mines won’t shut down simply because their parent companies are in bankruptcy.
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