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Daily Update: April 19, 2022

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Daily Update November 29, 2022

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Daily Update: November 28, 2022

October 2022 – Hong Kong carbon market, ISSB proposed emission standards

ESG Investment Research

Post-COP27: IPCC aligned indexes, time for changes?


Daily Update: April 19, 2022

Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy.

How Soon, If Ever, Will The U.S. Retire Coal?

How will the geopolitical shock on the global energy market from the ongoing Russia-Ukraine conflict affect the coal industry in the world’s largest economy? 

While the coal industry was already struggling before the pandemic and accompanying economic downturn, last year coal demand fell faster than industry observers had expected. Companies accelerated their existing plans to retire coal power plants. The rise of environmental, social, and governance (ESG) metrics limited the coal industry’s access to capital. At the 2021 United Nations Climate Change Conference in November, 46 countries and 26 companies pledged to cease both using coal-fired power and building new plants—with advanced economies and developing economies promising to kiss coal goodbye by the 2030s and 2040s, respectively. Now, Russia’s invasion of Ukraine has further disrupted the coal market as Western economies sanction the Russia’s supplies of the dirtiest fossil fuel and seek to recalibrate their energy security in balance with their energy transitions. 

Some market participants foresee the global mining industry and commodities like metallurgical coal playing a fundamental role in the energy mix over at least the next decade. And in the short-term, high-emitting economies like India and China are seeking coal amidst global disruptions and supply shortages.  But conditions are calling into question how soon the end of coal will actually come in major economies. 

“Disruptions in natural gas transiting from Russia to the European Union amid Russia's invasion of Ukraine and the associated sanctions drove a fresh run-up in EU commodity prices in March, which in turn influenced U.S. coal prices,” S&P Global Market Intelligence said in recent research. “The conflict in Ukraine dominated global commodities markets during March, including U.S. coal. Shipment data indicate a leveling of demand driven by both high prices and relatively normal coal plant inventory levels. Lower seasonal demand for coal may allow prices to move lower in the months ahead, but the global scramble for energy commodities appears likely to exert more influence than the normal domestic factors of electricity demand and natural gas prices.” 

In the U.S., the Energy Information Agency now expects coal exports, domestic consumption, and production to surge this year in response to the supply disruptions spurred by Russia's attacks on Ukraine, according to S&P Global Commodity Insights. 2022 is likely to see coal exports reach a three-year high of 89 million short tons, marking a 4.5% year-over-year increase in exports and the highest total recorded since 2019’s nearly 93 million short tons. Likewise, domestic coal consumption also appears likely to increase—by 2.6% year-over-year, to total 560.1 million short tons. The EIA anticipates that the U.S.’s coal production to grow 7.4% year-over-year in 2022, to 621.2 million short tons, and be followed by a 1.9% production increase in 2023. 

However, pressure from advocacy groups to clean up coal’s pollution and the rise of cheaper and more efficient renewable energy sources has left U.S. coal producers without any clear plans to construct new U.S. coal plants, according to S&P Global Market Intelligence. 

"No utility wants to put capital into coal plants these days," Morningstar analyst Travis Miller told S&P Global Market Intelligence. "Once you start putting capital into coal plants, you need those plants to run for 30 or 40 years before you get that capital back through depreciation."

More and more coal companies are announcing the retirements of their plants. Coal-fired resources accounted for three-fifths of U.S. generation capacity retirements last year. And an S&P Global Commodity Insights analysis found that coal plants intending to close by 2030 received nearly 27% of all U.S. coal production last year, while 37.4% of all production went to plants planned to close before 2042. 

Looking ahead, the Biden Administration’s plans to gain control of interstate smog pollution could, if enforced,  accelerate 18 gigawatts of incremental coal-fired power plant retirements by 2030, according to an S&P Global Market Intelligence analysis.

"There's a big, rising recognition starting to take hold that coal doesn't have a great future," Seth Feaster, an analyst at the Institute for Energy Economics and Financial Analysis, told S&P Global Market Intelligence.

Today is Tuesday, April 19, 2022, and here is today’s essential intelligence.

Written by Molly Mintz. 



Economy


Week Ahead Economic Preview: Week Of April 18, 2022

Flash PMIs released in the coming week across major developed economies offer a first look into the degree to which these countries have been affected by the Ukraine war and China lockdowns so far in April. Data out of China including Q1 GDP, March retail sales, and industrial production will also offer clues on the impact of the stricter COVID-19 restrictions on economic activities. Meanwhile Canada and the eurozone update inflation figures while policymakers at Bank Indonesia meet in the week.

—Read the full article from S&P Global Market Intelligence




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Capital Markets


Private Money Flowing Freely To Energy Transition Companies, Technologies

North American venture capital and private equity investment in new businesses targeting the energy transition hit a 10-year high in 2021, with experts noting the possibility of outsized returns from carbon capture, green hydrogen, and emerging clean technologies. U.S. and Canadian venture capital and private equity firms invested nearly $6.8 billion in 2021 in energy efficiency, storage, and management, along with new technologies to reduce carbon emissions, data from S&P Global Market Intelligence indicates.

—Read the full article from S&P Global Market Intelligence




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Global Trade


China Data: Gasoline, Gasoil, Jet Fuel Exports Slump 53% On Year In Q1

China's gasoil, gasoline, and jet fuel exports fell 52.7% in the first quarter from the same period of 2021, amid a steep reduction in export quota allocations, data released April 18 by the General Administration of Customs showed. Combined exports of the three key oil products amounted to 6.12 million mt, accounting for 47% of the total quotas allocated in the first batch for 2022, leaving 6.88 million mt available. Beijing is set to cut the country's oil product exports by slashing gasoline, gasoil, and jet export allocations in the first batch of quotas for 2022 by 56% year on year to 13 million mt.

—Read the full article from S&P Global Commodity Insights




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ESG


U.S. EPA's Plan For Interstate Smog Might Force Even More Early Coal Retirements

With the U.S. Environmental Protection Agency's climate authority over the nation's power sector in legal limbo, the Biden administration unveiled a plan in March for addressing interstate smog pollution that is projected to drive 18 GW in incremental coal-fired power plant retirements by 2030. That would rival the nearly 20 GW of coal-fired plants that were retired between January 2015 and April 2016 to comply with the Obama-era Mercury and Air Toxics Standards rule, a contested Clean Air Act regulation finalized in 2012 that was narrowly upheld by the U.S. Supreme Court.

—Read the full article from S&P Global Market Intelligence




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Energy & Commodities


China's Q1 Crude Runs Slide Amid Price Surge, Lockdowns

China's crude throughput slipped 1.5% year on year to 13.96 million b/d in the first quarter due to the dual blow of war-led lofty global oil prices as well as lockdowns imposed as a result of fresh outbreaks of COVID-19, a trend that may spill over into the following quarter in Asia's leading oil consumer. A slower-than-targeted economic growth rate in the same period also contributed to the bearish sentiment on the country's overall oil sector. Analysts attributed the throughput reduction in Q1 to a 2% year-on-year fall in runs March due to rising commodity prices and weakening domestic demand as COVID-19 re-emerged, capping a quarter that also witnessed run cuts earlier do to the Lunar New Year and the Olympics.

—Read the full article from S&P Global Commodity Insights




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Technology & Media


U.S. Internet Outages Increase 8% In 2nd Week Of April

The volume of internet outages in the U.S. increased 8% to 105 in the week of April 9, according to data from ThousandEyes, a network-monitoring service owned by Cisco Systems Inc. The U.S. total comprised 37% of all global internet disruptions, which totaled 287, a 4% increase from 277 in the prior week. ThousandEyes detected two notable interruptions in the previous week. An April 13 outage at network transit provider Hurricane Electric LLC affected customers and downstream partners in the U.S., Canada, and six other countries. The disruption apparently centered on nodes in Miami; Paris; Chicago; San Jose, Calif.; and Ashburn, Va. The 23-minute interruption was cleared at about 3:15 a.m. ET.

—Read the full article from S&P Global Market Intelligence




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