When China’s rapidly transitioning energy sector is considered, investments in thermal coal assets are “high risk”, according to a new report from the Carbon Tracker Initiative and the Association for Sustainable and Responsible Investment in Asia (ASrIA).
The report – The great coal cap: China’s energy policies and the financial implication for thermal coal – argues that as demand decreases in China, investors that are not actively assessing their holdings could be left with stranded assets.
Thermal coal currently provides just under 80% of China’s power. However, according to the report, the country’s demand will peak between 2015 and 2030 due to a range of factors, including slowing GDP growth, strong growth in the nation’s renewables sector and discussions around a carbon tax increasing the perceived risk to the future competitiveness of coal power.
The week, China, the world’s biggest polluter, has said it wants to set legal limits on carbon emissions from 2016, signalling its commitment to moving away from coal and other fossil fuels towards cleaner renewable energy sources.
Carbon Tracker CEO Anthony Hobley said, “China’s ‘great coal cap’ could feasibly peak China’s thermal coal demand in the near-term, presenting a significant risk of asset stranding for those investing on a business as usual future. Questions need to be asked whether committing billions of capital to increase thermal coal supply in a shrinking market is a wise use of capital.”
The report urges investors to assess the risks within their portfolio when peaking demand scenarios are considered in order to calculate exposure. In also calls on investors to urge China’s coal companies to improve disclosure with regards to future capital expenditure.
Investors not directly investing in China’s coal companies could also be at risk, as exporters of coal will need to find another end market or be left with excess supply and potentially stranded assets. This risk is of particular concern for Australian and Indonesia exporters.
Luke Sussams, senior researcher at Carbon Tracker and lead author of the report, explained, “Investors in Australian and Indonesian exporters of coal, in particular, must factor much lower Chinese demand into their demand and price forecasts.
“If China becomes a zero impact market, which is possible, there could be a noticeable lack of any viable alternative growth market for seaborne traded coals. Where will Australia’s $50 billion (£29 billion) of thermal coal go instead?”
Carbon Tracker rose to fame in the financial world with its flagship 2012 analysis, Unburnable Carbon, that said as much as 80% of the world’s fossil fuel reserves cannot be burned.
It said oil, gas and coal had to be left underground if efforts to tackle climate change are to be considered serious, and that such investments could lose significant value in the future as a result.
Photo: walker_M via Freeimages
Like our Facebook Page
Strange Ways the Sporting World Impacts the Environment
The Future of Cryptocurrency is Eco-Friendlier than the Present
Why Bill Gates Is Wrong on the Climate Impact of Bitcoin
Everything You Need to Know to Create an Eco-Friendly Nursery
4 Environmental Benefits of Using A Buckwheat Pillow
Eco-Friendly Ways to Dispose of The Office Furniture!
7 Huge Advantages of Using Solar Power at Home
5 Important Changes to Become An Eco-Friendly Nicotine User
4 Great Ways to be a Committed Eco-Tourist While Flying
7 Basic Types of Forex Charts Ethical Investors Must Understand
How to Make Your Ecommerce Business More Eco-Friendly?
How Can Social Media Help In Promoting Sustainable Lifestyle?
Luxury Development for The Ultra-Rich Causing Climate Change Conundrum in Barbuda
How Does Bitcoin Mining Work and is it Eco-Friendly?
Is Gen Z Ahead of Millennials in Terms of Eco-Investing?
Four Reasons Why Buying Used Cars Is the Way to Go Green
There is no Planet B: The Growing Importance of ESG
Wonderful Environmental Monitoring Tips to Keep Indoor Air Clean
The Tremendous Benefits of Investing in Energy-Efficient Windows
4 Morning Productivity Tips for Green Entrepreneurs that Are Night Owls
- Features10 months ago
Eco-Friendly Interior Design Is Easier Than You Might Think
- Features7 months ago
Eco-Friendly Hacks To Create A Durable Shop For Your Home
- Features8 months ago
5 Simple Ways To Create A Greener And Healthier Home
- Environment11 months ago
The Benefits Of Sustainable Agriculture For Farmers