Half of World's Coal May Go Unmined to Meet Paris Climate Target

  • World has 890 billion tons of coal, Bank of America says
  • Demand growth halted in 2014 for first time since 1990s

Coal, the fuel that powered the industrial revolution, is in hiding.

While the world still has 890 billion tons of reserves, enough to last more than 65 years, about half must stay underground if nations are to meet environmental limits agreed to earlier this month in Paris, Bank of America Corp. said in a report. Burning less coal is the easiest way to lower emissions blamed for climate change, the bank said.

The pact reached by 195 nations doesn’t target specific fuels, yet coal remains the world’s largest source of planet-warming carbon dioxide. A global oversupply of the power plant fuel has pushed producers into bankruptcy and sent prices to at least seven-year lows. The Paris agreement only further diminishes prospects for a recovery.

“The latest carbon initiatives are the nail in the coffin for global coal,” Sabine Schels, Peter Helles and Franciso Blanch, analysts at Bank of America said in the Dec. 18 report. If emissions limits take hold, “50 percent of the world’s current coal reserves may never be dug out.”

Coal demand stopped growing in 2014 for the first time since the 1990s as China’s economy cooled, the Paris-based International Energy Agency said Dec. 18. Coal for delivery to Amsterdam, Rotterdam, and Antwerp, an Atlantic benchmark, is trading near an eight-year low. Newcastle coal, a barometer for the Asia-Pacific market, is at the cheapest in records going back to 2008, data compiled by Bloomberg show.

Bull’s Eye

In the U.S., power generators are switching from coal to natural gas. CME Group Inc., which owns the New York Mercantile Exchange, ended a futures contract for Central Appalachia coal in 2016. Alpha Natural Resources Inc., Patriot Coal Corp., and Walter Energy Inc. are among producers that sought bankruptcy protection this year.

“Coal has the bull’s eye on it,” Lucas Pipes, an analyst at FBR Capital Markets & Co. in Arlington, Virginia, said by phone Monday. “It has never been more villainized.”

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