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U.S.-China Deal Suggests a New Way Forward for Coal Producers

November 12, 2014
Tom Sanzillo

By Tom Sanzillo  –  The much-publicized emissions-limit agreement announced last night between China and the U.S. is a step in the right direction.

It serves primarily as an all-important beginning to a coherent global framework for what has so far been a series of uncoordinated reactions to climate change. The most important government-policy responses to date on the looming threat of climate change have been a mostly unilateral mishmash of approaches that work to little holistic effect.

This deal is bigger than all of those.

As such, it will help move massive segments of the world economy away from fossil fuels—most notably away from coal—and toward new investment in a safer and better energy future.

The new accord between the U.S. and China—the two biggest economies in the world—shows bluntly that the energy-change train has left the station.

U.S. coal producers will do well to heed this news. It will require that they abandon current strategies of deriding or ignoring initiatives to build economies that are more rooted in cleaner energy. U.S. coal producers indeed have little to gain and everything to lose by sticking to mindless and outdated policies that only bring more harm to the producers themselves, to their mining communities, and to their investors.

This new US-China agreement says to the world in no uncertain terms that the leaders of our shared global economy realize we must collectively cut our production of greenhouse gases, and that we must do so in an orderly manner that stimulates new investment in cleaner energy.

How might coal producers adjust?

One, by publicly embracing the truth and by recognizing that layoffs, mine closings and bankruptcies are the signs of an industry in deep financial distress and a foolish way to continue doing business.

Two, by using their talent and resources to find a sustainable way forward toward diversification. Rather than relying on coal, these companies can shrewdly and responsibly branch out into other forms of energy development and become the clean-energy companies of tomorrow.

Investment in non-coal forms of energy is what will drive the upward spiral for job creation and growth beyond coal.

Tom Sanzillo is the direct of finance for IEEFA.

Tom Sanzillo

Tom Sanzillo is Director of Financial Analysis for IEEFA. He has produced influential studies on the oil, gas, petrochemical and coal sectors in the U.S. and internationally, including company and credit analyses, facility development, oil and gas reserves, stock and commodity market analysis, and public and private financial structures. He also examines such areas as community and shareholder activism, institutional investment, public subsidies and Puerto Rico’s energy economics.

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