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03/12/2016

Activists rejoice as world’s largest coal company files for bankruptcy

Energy

Activists rejoice as world’s largest coal company files for bankruptcy

Coal extractor in Kosovo.

[Dren Pozhegu/Flickr]

Peabody Energy, the world’s largest publicly listed coal mining company, filed for Chapter 11 bankruptcy protection under US law today (13 April), providing a boost to environmental activists campaigning for fossil fuel divestment.

Researchers at the US-based Institute for Energy Economics and Financial Analysis (IEEFA), which lobbies to reduce dependence on coal and other non-renewable energy resources, saw Peabody’s move as a sign of the ongoing structural decline of the global coal industry.

“Peabody Energy, to the detriment of its investors and employees, is bankrupt today because its leadership has been unable to adjust to new energy markets in which coal is being displaced by new energy sources,” said Tom Sanzillo, the IEEFA’s director of finance.

“That said, the coal industry is not dead,” Sanzillo added. “But it faces a time now in which is must innovate in ways that it has not done before. That means smaller markets and fewer mines.”

Peabody’s bankruptcy comes only months after a landmark agreement to cap global warming to 2°C was reached at the United Nation’s COP21 conference in Paris last December.

Brian Ricketts, Secretary-General of the European Association for Coal and Lignite (Euracoal), said after the COP21 conference that the sector “will be hated and vilified, in the same way that slave traders were once hated and vilified”.

Coal lobby chief: COP21 means 'we will be hated like slave traders'

EXCLUSIVE / The coal industry’s European lobbying association has said that the landmark deal to cap global warming at the UN Climate Change Conference (COP21) in Paris means the sector “will be hated and vilified, in the same way that slave traders were once hated and vilified”.

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More fundamentally, Peabody’s bankruptcy could signal a deeper shift in global investments away from fossil fuels at a time when regulators are looking at ways to “stress test” portfolios of large institutional investors against long-term objectives to reduce climate change.

“Climate risks should be further integrated in investment portfolios,” said Alexis Dutertre, the Deputy Permanent Representative of France to the EU, during a recent event in Brussels where he suggested “penalties” be imposed for those investing in fossil fuels.

EU pushed towards ‘climate disclosure’ regime for investors

Pressure is building on global regulators and the European Commission to “stress-test” portfolios of large institutional investors against long-term objectives to reduce climate change, in a move that could shift billions in investment away from fossil fuels.

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For the IEEFA, Peabody’s bankruptcy marks the end of an era that can be traced to the 1990s, when coal companies began to rely more on public equity markets, excess financial leverage, and multibillion-dollar debt-funded acquisitions.

“The biggest coal giant has fallen, and Peabody Energy’s bankruptcy should serve as a wake-up call to anyone promising that coal’s glory days will return,” said Mary Anne Hitt, director of the Sierra Club’s Beyond Coal Campaign.

Bill McKibben, co founder of 350.org, an environmental campaign group, showed little sympathy for the workers of Peabody now out of a job.

“This is a company that wilfully and deliberately sought to delay, dismantle or destruct climate action. Perhaps if they had spent more time and money diversifying their business rather than on lobbying against climate action and sowing the seeds of doubt about the science, they might not have joined the long (and ever growing) list of bankrupt global coal companies.”