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Coal-Industry Investors Bullish on Waxman-Markey?

May 26th, 2009 · No Comments

Let’s be clear: coal is a killer. Despite the fantasies that coal industry advocates and astroturf organizations like to sell about “clean coal“, coal is a killer in the near term (asthma, black lung, etc), mid-term (mercury), and long term (climate change).

While coal has had a powerful role in powering the globe from poverty into modernity, it is well past time to understand that our knowledge of the costs of a 19th-century polluting energy approach has deepened while the realistic and viable alternatives have increased.  Simply put, if we are going to have any hope to avert catastrophe, we have to begin to figure out how to keep coal and its carbon in the ground rather than accelerate its mining and burning (in the US and around the globe, most notably China).

With coal’s quite significant role in contributing to global warming through the emissions of roughly two pounds of CO2 for every kilowatt hour generated, one would expect that any serious climate legislation (in the United States or elsewhere) would be feared by coal-industry investors.  Efforts to ‘get off coal’ to help avoid catastrophic climate change could be expected to depress the marketability of coal and, in a relative manner, lower the value of coal companies and of coal deposits.

And, while the coal industry has been a highly profitable sector in recent years, a way for an investor to make money amid market turmoil and losses, the coal sector definitely seems to have been constrained in the face of developing House climate legislation, the Waxman-Markey American Clean Energy and Security (ACES) Act.  That is, until recently …

While market signals are often inaccurate, they often tell a powerful story.

In late April, it became increasingly clear that Democratic members of the House Energy and Commerce Committee were working on paths to satisfy coal industry interests in seeking to get the ACES out of committee and to the rest of the House. And, coal industry investors seem to have picked up the message.

While having seen rather mild increases for the previous several months, while the rest of the stock market was well into the Obama bounce, in May (through last Thursday, 21 May), the coal industry skyrocketed past the overall market’s performance.  While the Dow is up 5.1 percent for the last month (including the large, over 2 percent, day’s jump as of 1400 26 May 09) as of , the coal index jumped 27 percent through 21 May.

What does it mean for the prospect of avoiding catastrophic climate change when coal stocks’ surge mirrors climate bill concessions?

Perhaps investors like the $trillion+ in direct and indirect subsidies for the fossil fuel industry

NOTE: Of course there are other factors, such as analysts (after the rebound had started) upgrading the sector on expectation of coal price increases and the overall energy sector’s bumps.

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Tags: coal