Following the Supreme Court’s surprise ruling Tuesday staying the US EPA’s Clean Power Plan, you might have expected coal executives to toss confetti and pop champagne corks while watching their companies’ beaten-down stock prices tick up.
In fact, coal stocks did rally briefly on Wednesday, as some investors rushed in hoping that the Court had come to their rescue: Peabody Coal, the nation’s largest coal miner, rocketed up by more than 25% at the opening. By the afternoon bell, however, this surge proved to be another “dead cat bounce” as Peabody and other coal stocks continued their downward slide.
At Thursday’s close, Peabody’s stock had shed nearly 55% from its Wednesday peak, on the heels of a dismal fourth quarter report and growing fears from financial analysts that it may be joining Arch, Alpha, Patriot and other fellow coal giants in the bankruptcy parade.
This tumble comes on top of an epic slide that saw Peabody stock shed more than 99.5% of its value since 2011—the same year, not coincidentally, that the company announced its plans to export coal through a Washington port to Asian markets. As shown in a great new report from Sightline and IEEFA, Peabody’s plans to stay afloat, by offloading assets and restructuring its crippling debt load, ignore market realities and are unlikely to keep it solvent.
Make no mistake—the Supreme Court’s decision was unprecedented (the court had never before issued a stay on a pending agency rule before letting lower courts weigh in on the merits) and very unfortunate. We are hopeful that the Court will ultimately uphold this key pillar of the Obama Administration’s commitments that it took to the COP21 Climate Conference in Paris, as it earlier upheld the Environmental Protection Agency (EPA)’s authority to regulate global warming pollution under the federal Clean Air Act.
The EPA not only has the authority to regulate emissions from existing power plants, it is legally required to do so. The public overwhelmingly supports the Clean Power Plan, especially here in the Northwest States of Washington and Oregon where citizens are demanding climate action and access to cleaner energy. Around the country, hundreds of business and investment leaders support the Clean Power Plan because they want clear policies that drive cleaner energy. Unless the Court is swayed by political considerations, we are confident it will ultimately make the right call and uphold the rule.
While the decision creates uncertainty about the future of the Clean Power Plan, coal’s fate is clear. Investors have already written the sector off for dead, and global momentum for climate action coming out of the COP 21 talks in Paris, as well as the widening call for divestment are accelerating the capital flight. .
Asian markets are drying up, as China, India, and other countries reduce imports and increase investment in clean energy. And dropping prices and coal bankruptcies have set off a death spiral that keeps coal unprofitable and threatens the viability of the remaining producers. At a recent industry gathering, coal baron Robert Murray decried “zombie mines” operated by insolvent producers that were pushing prices down and the whole industry toward bankruptcy.
Specific to the Clean Power Plan, the major utilities that operate most of the remaining coal-fired power plants in the country are pushing ahead with their plans to replace these units with cleaner and more efficient energy, regardless of the Supreme Court’s decision. Leadership states around the country continue to work on plans to transition their energy sectors consistent with the Clean Power Plan. Innovative state-level policies, such as Oregon’s Clean Energy and Coal Transition Plan and the Washington Clean Air Rule, proceed apace, while the costs for solar, wind, and efficiency keep dropping, along with natural gas, making coal irrelevant for a 21st Century energy system. However the legal case turns out, coal companies will have fewer power plants wanting to burn their product and competition from a wider range of cheaper alternatives.
The bottom line: while some climate advocates may be tempted to panic following the Supreme Court’s decision, the wiser action would be to keep calm and carry on. We have a revolution underway and the nation’s energy sector to transform.
