Europe’s coal industry on its knees, says leading investor

Frimmersdorf, Germany - June 27 2018: Workers Leaving Factory Ga

A coal-fired power plant Frimmersdorf in Germany. Photo credit: kruwt via Bigstock.

By Anders Lorenzen

The coal industry is rapidly heading to a decline in Europe. Or so predicts a senior London hedge fund manager, Per Lekander, who manages funds worth more than $1.1 billion (bn) at Lansdowne Partners, an investment management company.

Lekander believes that coal demand in Europe will collapse within three years. The reason? Increased concern about climate change and the soaring of the rise of the EU carbon price.

The carbon price in the EU’s emission trading scheme EU ETS currently stands at €20 per tonne of carbon. But Lekander is betting big that within the next three years the carbon price will soar to €50 and thereby bring Europe’s coal industry to its knees. He thinks that is a likely scenario as climate change moves up on the political agenda.

“My projection for coal becoming less than 5% is three to four years because once you get a €50 carbon price, it shuts down,” Lekander told the Financial Times. He further explained that investors are increasingly starting to realise that climate change is real and if that is the case then you simply have to reduce emissions. He even believes that the disappearance of coal could go even faster and it could go all the way down to 0%.

Lekander thinks that in the last year there has been a huge shift in investor thinking towards environmental issues. He says that when companies such as Glencore starts talking about it, then it is serious.

However, even though Lekander has made heavy profits on carbon trading it has seen as serious fall so far in 2019, declining to €20 today from €25 at the end of 2018. Though he believes that is due to a relatively mild winter with less demand for gas. He, therefore, believes the decline is only temporary and it will bounce back.

Taking a long-term view though, it was early as 2015 that the carbon price was lingering at about €5 and has recovered significantly since then and, according to Lekander, the price will only continue to go from strength to strength as Europe gets serious about tackling climate change.

Lekander’s comments come at a time when even though many European countries such as the UK, France and Denmark has been successful in almost getting completely rid of coal from their electricity mix, industrial heavyweights such as Germany and Poland are struggling to even stop increasing demand. If Lekander’s predictions are to become a reality one thing is for sure: it will radically transform Europe’s energy mix.

8 replies »

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s