ASX 200 energy shares in firing line of United Nations’ climate action

Coal producers are coming under increasing pressure as global bodies move to decarbonise energy sources
The post ASX 200 energy shares in firing line of United Nations’ climate action appeared first on The Motley Fool Australia. –

S&P/ASX 200 Index (ASX: XJO) energy shares focused on coal production are under fire from the United Nations’ latest proposal to try to limit global warming.

According to the Daily Mail, the UN has given Australia a 10-year deadline to shut down the coal mining industry.

The article noted that the UN’s assistant secretary-general and special adviser on climate action, Selwin Hart, “told the ANU’s [Australian National University] Crawford Leadership Forum the phasing out of coal is a prerequisite of limiting global warming to 1.5C”.

According to Hart, “If the world does not rapidly phase out coal, climate change will wreak havoc right across the Australian economy: from agriculture to tourism, and right across the services sector.”

Multibillion-dollar ASX 200 energy shares that would need to shut operations or transition to other resource development inside the next decade include Yancoal Australia Ltd (ASX: YAL), Whitehaven Coal Ltd (ASX: WHC), and New Hope Corporation Limited (ASX: NHC).

As for the 50,000 Aussies working for these ASX 200 energy shares and in the rest of the coal industry?

Hart said they were entitled to a “just transition” to new jobs.

Australian government responds

Coal, as you may be aware, is Australia’s number 2 export earner, coming in right behind iron ore.

In fact, as Resources Minister Keith Pitt pointed out, coal exports increased 26% quarter-on-quarter in the 3 months to July, hitting $12.5 billion.

Pitt said (quoted by the Daily Mail):

The future of this crucial industry will be decided by the Australian Government, not a foreign body that wants to shut it down costing thousands of jobs and billions of export dollars for our economy…

Coal will continue to generate billions of dollars in royalties and taxes for state and federal governments, and directly employ over 50,000 Australians.

Atop the government’s strong support, there’s another hitch in the UN’s proposal that could see these ASX 200 energy shares producing coal well beyond the 10-year deadline.

Australia only supplies 6% of the global annual coal demand. And that 6% is largely high quality, lower emissions coal compared to that supplied by other international sources.

For the UN’s coal mining ban proposal to have any meaningful impact on CO2 reduction, the world’s top 3 coal-producing nations would surely need to be on board.

It’s unclear if those top coal producers – China, India, and Indonesia – have been approached by the international body to plan for their own 10-year phase-out. But judging by the Australian government’s response, it’s unlikely they’ll jump on the UN’s bandwagon.

How have these ASX 200 energy shares performed?

The 3 ASX 200 energy shares with a strong focus on coal production listed above have put in a mixed performance this year.

The Yancoal share price is down 3% year-to-date, and up 12% over the past month.

The Whitehaven share price is up 80% for the calendar year, and up 37% over the last month.

The New Hope share price is up 57% in 2021, and up 14% over the past month.

Will investors begin selling out of these ASX 200 energy shares with an eye to potential coal bans?

Perhaps in time.

But at the moment, with global demand for coal remaining buoyant and government support for the industry strong, that time looks to be well over the horizon.

The post ASX 200 energy shares in firing line of United Nations’ climate action appeared first on The Motley Fool Australia.

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More reading

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The Whitehaven Coal (ASX:WHC) share price is up 20% in the last week

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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