World Coal Association admits that divestment is a concern for the industry, but says it won’t dent growth
By Sophie Yeo
The World Coal Association has hit back against the growing campaign to persuade investors to withdraw their money from the fossil fuel industry.
The lobby group, which represents coal companies such as Rio Tinto, Peabody Energy and BHP Billiton, has published a document claiming that even coal plants that do not capture emissions will be part of a low-carbon future.
It says the fossil fuel divestment movement — which has signed up universities, faith groups and local authorities — will fail to restrict the growth of coal and could force the industry to use dirtier, cheaper technology.
“Divestment campaigns aim to create the very risks they warn of in order to undermine investor confidence and deprive fossil fuel producers of the finance necessary to operate their businesses,” said the document.
The World Coal Association was the lobby group behind a coal conference that took place alongside the UN’s 2013 climate talks in Poland, sparking widespread condemnation and protests.
According to its website, its purpose is to “demonstrate and gain acceptance for the fundamental role coal plays in achieving a sustainable and lower carbon energy future”.
It frames divestment as a distraction from the development of cleaner technologies and a threat to the alleviation of poverty in countries like India, where millions of citizens still lack electricity.
“The priority should therefore be how we access the benefits of coal while minimising environmental impacts,” it added.
While the lobby group played down the impacts of divestment on the future of the industry, the campaign has gathered steam over the past year.
A number of high profile investors have agreed to pull their money from fossil fuels, including the Rockefeller Brothers Fund and the World Council of Churches. In the US, Stanford University withdrew from coal specifically, targeting it as the most polluting form of conventional fossil fuel.
In a separate interview with RTCC, Benjamin Sporton, acting chief executive of the WCA, admitted that the industry was concerned about the impact that the campaign could have.
“Coal companies are concerned that divestment campaigns will lead to responsible investors leaving the industry,” he said.
“Stepping away from the fossil fuel industry does not mean that the demand for fossil fuels goes away – it just means that environmentally conscious investors lose any influence they had over the operation of those companies.”
While the WCA is confident that the coal industry will continue to grow, the International Energy Agency predicted in December that growth would slow down.
Maria van der Hoeven, head of the IEA, stressed that coal in its current form was unsustainable, but was likely to continue to grow over the next five years in spite of policies and pledges aimed at tackling climate change.
Its Medium Term Market Report 2014 sees coal demand growing at an average rate of 2.1% a year through to 2019, compared to a growth rate of 3.3% a year between 2010 and 2013.
Decline and fall
Coal’s future hinges on demand from China, the world’s largest consumer of coal. While reliable figures are hard to come by, some analysts suggest demand may have already peaked.
The US Energy Administration Information announced last week that US coal production is expected to decline in 2015 and 2016. But other producers are developing new mines, for example in Australia’s Galilee Basin.
The UN’s 2015 Paris deal, which will come into effect in 2020, could represent a sea change for the industry: one of the options currently being debated by governments is total decarbonisation of the world’s economies by 2050.
Jamie Henn, co-founder of 350.org, the group spearheading the divestment campaign, told RTCC: “People who are investing in coal today were probably the same people who hung desperately to their typewriter investments when the computer was invented.
“Staying with coal isn’t just wrong, it’s stupid. Most coal industry investments have lost nearly 90% of their market value in the last four years. Report after report has shown that solar and other renewables are the fastest, cheapest, and cleanest way to get power to the billions of people who still lack basic energy access.
“For the coal industry to be running their marketing strategy on the backs of the poor is the highest form of deception and deeply immoral.”
The WCA’s claim that divestment poses a threat to cleaner coal, and therefore to efforts to reduce global carbon emissions, is also contentious. Scientists say coal plants that are not equipped with carbon capture and storage (CCS) technology are incompatible with a world where temperatures are limited to below 2C.
“There is no room in the remaining carbon budget for building new unabated coal power plants, even highly efficient ones, given their long lifetimes,” wrote a coalition of 27 high profile scientists in a declaration released in 2013.
The recent decision of four European utilities to abandon a CCS research project because the technology is too costly dealt a further blow to coal’s ambition to be part of a clean energy future.
Unless the fledging technology can be deployed on a large scale, then emissions associated with burning coal put the world on course to overshoot its 2C target.
“The hope for coal is to be abated, and if that is no longer the case then there’s really a question on the future of coal,” Christiana Figueres, the UN’s climate chief, told RTCC.
Divestment campaigners are aware that, in the face of the multi-trillion dollar fossil fuel industry, the actions of a few environmentally-minded investors will make barely a dent.
In the document, the WCA points out that divestment means assets are sold from one company to another: “In other words, divestment does nothing to affect the demand for or use of fossil fuels.”
Activists acknowledge that the real aim of the divestment campaign is to stigmatise fossil fuel companies — a tactic which is “unfortunate… when our focus should be on meeting environmental challenges, while ensuring we can sustainably meet global energy demand,” said WCA’s Sporton.
A 2013 paper by academics at Oxford suggested that, in the history of divestment campaigns, it is the stigmatising effect that eventually starves targeted organisations of the funds they need to function.
A firm with a bad image can scare away suppliers, customers and politicians keen to maintain a clean reputation.
The report adds: “Negative consequences of stigma also include cancellation of multibillion-dollar contracts or mergers/acquisitions.”