Peabody Energy, the largest coal company in the Western world, declared bankruptcy Wednesday. The announcement is a towering sign that coal power likely has reached a point of no return in a world seeking cleaner energy sources.
Nearly 200 countries committed last December in Paris to cut emissions of heat-trapping greenhouse gases. Burning coal for electricity emits twice the carbon dioxide of natural gas, and the resulting pollutants have been linked to thousands of premature deaths and asthma attacks annually in the United States alone. Plus, coal is now facing stiffer competition than ever from natural gas, wind, and solar. (Read more about why solar and wind are thriving.)
Market trends for coal “have turned markedly negative over recent months, contrary to many still optimistic forecasts,” says Tim Buckley of the Institute for Energy Economics and Financial Analysis, a research group that supports sustainable energy.
Peabody, based in St. Louis, joins other American coal companies that have recently declared bankruptcy, including Arch Coal and Alpha Natural Resources. Peabody produces roughly 170 million metric tons of coal a year—close to a fifth of the U.S. supply. (The world’s largest producer, Coal India, puts out about twice as much.)
Demand for its product is going down: The U.S. Energy Information Administration predicts natural gas will overtake coal as the leading fuel for the nation’s electricity in 2016. Last year, 80 percent of the power supply that was shut down came from coal.
The wobbly outlook extends beyond the United States. China, the world’s top polluter, says its coal consumption dropped over the past two years, and it recently halted construction on new coal-fired plants in 15 regions.
The changed market seems to have caught U.S. companies off guard. “Everybody thought they would be exporting lots of coal into China,” energy consultant Katherine Hamilton commented on a recent Energy Gang podcast, “and that’s just not going to happen.”
India’s coal imports are also down, and though the country is boosting domestic coal output, it’s also making a huge push to expand solar energy, with plans to install a hundred gigawatts of capacity over the next six years.
Indeed, Buckley says India has invested so massively in solar that it’s now cheaper there compared to power from a new plant running on imported coal: “No one in the coal industry, no one in the [International Energy Agency], no one at Peabody saw that coming.”
Efforts to make coal power “clean,” or at least clean enough to pass regulatory muster, by capturing carbon at the smokestack remain expensive and not quite proven—Canada’s $1.1 billion Boundary Dam project is facing political heat for its so far underwhelming results.
Meanwhile, cleaner energy options, bolstered by the Paris agreement and a growing awareness of coal’s social and health costs, have galloped ahead as prices continue to fall. (See the surprising countries where solar and wind are booming.)
“Peabody is crashing because the company was unwilling to change with the times,” says Jenny Marienau of the environmental group 350.org, calling the impending bankruptcy a “harbinger of the end of the fossil fuel era.”
Still, coal is far from disappearing. China and India both have approved hundreds of new coal-fired power plants, and the fuel’s use remains robust in countries from Australia to Turkey. And where coal is swapped out for natural gas, the transition away from all fossil fuels remains further off than many climate advocates would hope.
Peabody’s bankruptcy, however, symbolizes an incontrovertible trend, according to Buckley, who says the industry has refused to confront the fact that it is in decline not just because of new climate rules but pure economics.
“There’s no suggestion that demand is going to go back up for coal,” he says, adding that if Peabody emerges from Chapter 11, it will face a coal market that “is going to be dramatically smaller.”