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Climate activists look past Clean Power Plan in tussle with wounded coal sector

Beforethe Clean Power Plan even has a chance to inflict full damage on the coal sector, activistsintent on moving past fossil fuels are setting goals beyond the federal carbonplan.

BruceNilles, senior director of the Sierra Club's Beyond Coal campaign, is aimingfor zero generation of electricity from fossil fuels by 2030. He told S&PGlobal Market Intelligence that the implementation of the Clean Power Plan isonly a first step and that meeting climate commitments made at United Nationsclimate talks in Parisand averting dangerous levels of global warming will require activists tocontinue and even strengthen a many-pronged effort to topple fossil fuelcompanies.

"Whilewe are fully in pushing in the Clean Power Plan, we're also engaged in work atboth the state level and regional and national level to ensure we're setting upto go far beyond the Clean Power Plan as fast as possible," Nilles said.

Weaknessin the U.S. coal market, largely driven by natural gas prices low enough todrive coal out of even some of its most traditionally secure markets, is makingit easier for groups like the Sierra Club to push their . Nilles pointed torecent victories at the state level, such as getting Oregon to to phasing coal out ofits generation mix. They have also been working in other states to accumulate smalland large victories against companies that mine or burn coal.

"Allthat is setting us up to go for far deeper carbon reductions in the electricsector for the next 15 years," Nilles said.

Throughall the gloom, some in the coal industry see glimmers of hope for coal, even ina carbon-constrained world.

"Wewill very quickly develop low carbon emission coal," said Fred Palmer, aretired executive for PeabodyEnergy Corp. and principal for GreenCoal Solutions LLC, at the 24thAnnual Coal Properties and Investment Conference hosted by Platts. "… Coalneeds to change its game: embrace technology, be positive and proactive andgrow business to enhance the quality of life for everyone, everywhere."

Support for coal weak

Groupslike the Sierra Club say that is not enough given the uncertainty of thetechnology as well as mining impacts and are instead pushing for investment inother technologies such as renewable generation or new grid enhancementefforts. On a policy dispute level, Nilles said, the weak coal market has tiedup money that may have otherwise been used by coal companies on lobbying andpolitical contributions.

Accordingto one recent analysis,coal industry lobbying expenditures remained more than $1 million down in 2015from the year-ago period.

"Theydon't have the resources today," Nilles said. "They are very muchfocused inwardly, because they are all facing on the mining side."

Hesaid that now, utilitiesare beginning to realize that coal "is not a long-term friend," and Wall Street investorsare starting to understand that a lot of opportunities to make money on coalnames are disappearing.

"Alot of people lost a lot of money," Nilles said. "Wall Street hasbeen slow, but it is finally catching up to the reality that coal makes noeconomic sense."

JamieHenn, strategy and communications director and co-founder of fossil fueldivestment leader, said their campaign is modeled on divestmentmovements such as those used to protest Apartheid and tobacco companies. Hesaid institutions are joining divestment efforts even faster than they wouldhave thought.

"Thegoal was to do two things: go after the social license of the fossil fuelindustry — really stigmatize these companies and thereby open space for action— and second, to help push forward this larger economic discussion about theneed to move money out of fossil fuels and then to renewable energy," Hennsaid.

Theseefforts have been boosted by the deflated stocks of coal companies, making itless financially risky to divest of fossil fuels, particularly coal. Themarket value of thepublic coal sector has plummeted to a fraction of its value even a few yearsago.

Hennsaid that given the waveof coal company bankruptcies, divestment of fossil fuels is becoming as much afiduciary issue as an ethical one.

"It'sa rare occurrence when activists and Wall Street investors see eye-to-eye andare even approaching a problem together," Henn said, referencing a growingtrend toward green investment and the development of fossil free investmentvehicles.

Investorsand environmentalists alike are also closely watching Peabody. The company has issued a going concernnotice and indicated financial stress as it has tried to sell off certain ofits assets to obtain liquidity. Henn said that if Peabody were to file forbankruptcy, investors who have not changed their mind on coal yet may takenotice and even decide to broadly shed "exposure to carbon risk" acrosstheir portfolios.

"Whenpeople think coal companies, they think Peabody," Henn said. "TheArch Coal Inc.bankruptcy was big news,but this is an era-defining development. It really feels like with theexpected bankruptcyof Peabody, King Coal has officially fallen from his throne."

APeabody bankruptcy, he said, would offer bankers another reason to hesitate onloans to fossil fuel companies and give activists yet another cautionary taleif the world's largest private sector coal company were to fall.

Peabody still sees role forcoal

BethSutton, a spokeswoman for Peabody, said the calls for divestment are largelysymbolic and "that symbolism itself is misguided." She said fossilfuels provide more than 80% of global energy and that 40% of global electricityis from coal. She said coal is "expected to remain an essential source ofglobal electricity generation and steel making for many decades to come."

"Astudy by Daniel Fischel of the University of Chicago finds the diversificationcost from divesting energy stocks would represent a 23% loss over a 50-yearhorizon," Sutton said. "The study found no evidence of anydiscernible impact on the companies being targeted by the policy. Meanwhile,each day hundreds of millions of people around the world wake up to thebenefits of coal-fueled electricity which help them live longer and betterlives."

Suttonsaid that while challengingmarket conditions have been impact by an oversupply of natural gas, mildweather and regulatory pressures, over time some third-party estimates areprojecting gas prices may rebound and offer the coal industry a chance tostabilize. Peabody, which has led a number of projects to produce advanced coaltechnologies including carbon capture, has been backing the Advanced Energy forLife Campaign, an effort to promote a potential role for coal in alleviatingchallenges associated with a lack of energy access worldwide.

"OurAdvanced Energy for Life campaign continues to highlight the essential need forlow cost energy and recognizes the critical role technology-led solutions mustplay in meeting the world's shared energy economic and environmental goals,"Sutton said. "Key initiatives from this past year include Peabody'srecognition of the cleanest coal-fueled power plants in the world, along withcontinued emphasis on deploying [high-efficiency, low-emissions] technologies andlonger term, commercialization of carbon capture and storage to achieve theworld's environmental goals."

PeabodyPresident and CEO Glenn Kellow chairsthe National Coal Council — an advisory committee to the U.S. Department ofEnergy — and has been an advocate for policy parity options for coaltechnologies in the U.S. On one recent call, Kellow said a report recentlyreleased by the group supports using coal in a path toward near-zero emissions,but that greater support from the government would be necessary to achievedeployment of technology such as carbon capture.

Turning to broader fossilfuel attack

Hennsaid that is also exploring broader policy initiatives to ensure thatcoal does not spring back should natural gas prices recover. He said a carbonprice would be ideal for ensuring that fossil fuels on the whole continue tomove downward.

"Wecan't just take this sector by sector, by sector," Henn said. "Weneed much more of a holistic approach."

TheSierra Club is already making strides on stopping natural gas as well.

"Gasis threatening to come back if we don't act more vigilantly," Nilles said."You will see increasing attention on ensuring we're not building a bunchof new gas plants and locking us into a high-carbon infrastructure goingforward."

Nillessaid the group is currently targeting pollution from existing natural gasplants. He said as coal and natural gas plants are displaced, the group aims toget clean energy online in its place quickly so that even newly built plantswill not run in the future.

"Theremay still be gas plants online in 2030, but they're white elephants,"Nilles said. "They're sitting there not running."

Platts and S&PGlobal Market Intelligence are owned by McGraw Hill Financial Inc.