From Wyoming to Wall Street, pledges to get out of the coal business are still overshadowed by sentimental attachment and easy profits.
In too many parts of the world, coal is still an addiction. China, Australia, Eastern Europe and the United States have habits that some of their top leaders still don’t want to break. Take Wyoming’s governor Mark Gordon, for instance, who, in his March 2 State of the State Address, announced that despite the clamor to shut it down: “I will not waiver in my efforts to protect our coal industry.”
Faced with declining tax revenues, painful budget cuts and steady job losses, Gordon’s commitment to the coal industry exemplifies the challenge President Biden faces in mapping out a fair and equitable transition to clean energy. Coal still generates 38% of the world’s electricity, still the largest share of any fuel. Even with production at a 40-year low in the United States, it is still the country’s second-largest source of electricity.
Gordon’s commitment to the coal industry exemplifies the challenge President Biden faces in mapping out a fair and equitable transition to clean energy.
Wall Street is not helping. A new report, published by Urgewald, Reclaim Finance, Rainforest Action Network, 350.org Japan, and 25 other NGOs, has found that as of January, the world’s leading financial institutions still have more than $1 trillion invested in companies working in the coal industry — despite pledges in recent years to reduce such holdings. Of that $1 trillion, the report found, U.S. investors held more than $600 billion, which amounts to the largest share, 58%. According to the report, US Vanguard is the world’s largest institutional investor in the coal industry with holdings of almost $86 billion. BlackRock is second, with investments of over $84 billion.
The wrong direction
Not only does the new report seem to give the lie to some of the banks’ own public statements, it underscores a grim reality: In spite of all the hopeful signs that the world is turning to renewable energy, patterns suggest emissions levels are back on the rise after a brief COVID-19 hiatus.
The International Energy Agency (IEA) recently reported that global CO2 emissions have returned to pre-pandemic levels and were two percent higher in December 2020 than in the same month a year earlier. Said IEA executive director Fatih Birol in a statement: “The rebound in global carbon emissions toward the end of last year is a stark warning that not enough is being done to accelerate clean energy transitions worldwide.”
In order to reach the goals of the Paris Agreement and limit global warming to 1.5°C, the United Nations says from now until 2030, the global production of coal would have to decline annually by 11% to reduce CO2 emissions.
In order to reach the goals of the Paris Agreement … the global production of coal would have to decline annually by 11% to reduce CO2 emissions.
It’s not that there is no progress. Indeed, last year U.S. annual energy consumption from renewables surpassed coal for the first time since 1885, reported the Energy Information Administration (EIA).
And yes, market dynamics are also helping reduce the use of coal. Competition from cheaper renewables, record-low natural gas prices and reduced power demand during the pandemic sent coal consumption in the U.S. down by 30% in the first half of 2020 compared to the same period last year, according to IEA.
A just transition?
Yet most climate scientists and energy analysts say market forces just are not enough. Something has to be done to offset the huge shock to companies, communities — the people who rely on coal and have for centuries. What is needed are more state and federal policies to ensure a reduction in carbon emissions as well as an equitable transition to a more sustainable economy in formerly coal-dependent areas. State and federal efforts are slowly coming. In the past year, Colorado and New Mexico approved legislation to create just transition offices in their states. A similar measure was also introduced in West Virginia.
But a comprehensive framework is needed, and that is exactly what Just Transition Fund executive director Heidi Binko says her organization has been working on with coal communities across the nation for the last five years.
“Since 2015, the federal government has invested millions of dollars,” Binko told Climate & Capital Media. “But to effectively address this problem, we need billions in investment — in a range of economic diversification, workforce, and infrastructure needs.”
“To effectively address this problem, we need billions in investment — in a range of economic diversification, workforce, and infrastructure needs.”
Last year, her organization and a team of representatives from U.S. coal communities launched the National Economic Transition (NET) platform to revitalize regions losing coal jobs in 2020.
Those are all good first steps. On the federal level, the Biden administration published an executive order on February 1 creating the “Interagency Working Group on Coal and Power Plant Communities and Economic Revitalization” to support coal and power plant communities. Biden has given the body until late spring to develop a plan.
But back in Wyoming, state officials are not ready to call it quits just yet — despite the stark economic reality of the coal industry’s decline.
Wyoming wants it both ways
Back in Wyoming, despite the stark decline in the coal industry’s fortunes, state officials are determined to hold on. Wyoming produces nearly 40% of the country’s coal — more than three times as much as West Virginia. And in the last six years, a half dozen companies have filed for bankruptcy. The state’s coal mining sector last year alone lost 761 jobs.
With declining tax revenues, Wyoming now faces an estimated $1.5 billion revenue shortfall through June 2022, according to the Consensus Revenue Estimating Group, a collection of forecasters that consists of Wyoming state officials, economists and energy experts.
With declining tax revenues, Wyoming now faces an estimated $1.5 billion revenue shortfall through June 2022.
Nevertheless, Governor Gordon said he still believes the coal industry can play a significant part in the state’s energy portfolio. To that end, the state has dedicated $15 million to create the Wyoming Integrated Test Center to study the capture of carbon emissions from coal-burning power plants. Gordon believes that the captured carbon can then be buried in the coal mines no longer in operation.
In contrast to that approach, Wyoming is soon to be home to one of the nation’s largest wind farms. With as many as 1,000 turbines, the estimated $5 billion Chokecherry and Sierra Madre Wind Energy project is being built by billionaire Philip Anschutz and could produce enough electricity to power about 1.8 million homes when finally completed in 2025.
“Wyoming is embracing solar and wind development,” Gordon said, perhaps somewhat reluctantly. “But, we are not fooled by false promises either.” After all, that’s why it’s so hard to beat a habit: The addict wants to know that even after quitting, everything is going to be just fine. In the transition out of coal, there is no such guarantee.