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Like Prohibition is to Moonshine, Green divestment activists are a boon for coal investors

When wowsers banned alcohol in the US, the price of beer rose sevenfold. Nick Cater points at rising coal share prices and ponders that the Green divestment plan to reduce coal use works just as well as prohibition did. Divestment shrinks capital inflow to coal mines, so there are fewer new mines, and less coal available. But people still want just as much coal as they ever did, so the price of coal goes up instead of down. Good news for coal investors. Too bad about those on the poverty line. Put some more dung in the barbie…..

Once again Green economics amounts to Wish Fairy Declarations. The first Law of Free Markets is Supply and Demand.  The Greens might have changed the “supply” slightly (temporarily, and only in some countries) but demand hasn’t changed, so supply will rebound.

To help the poor afford coal the only ethical thing to do is invest in coal mining:

Nick Cater, The Australian

History is unlikely to be kind to them. Coercive attempts to stop the use of fossil fuels are delivering the same perverse economic consequences as the attempts to close down American saloon bars in the 1920s. The consumers pay more for a substance they choose not to live without, while the producers count the profits.

A report released last week by international financial analysts Redburn predicts a similar result from the activist-driven campaign against fossil fuel companies.

The attempt to starve coal producers of capital has impeded their attempts to build new coal mines but it hasn’t got in the way of profits. The price of coal has risen to a six-year high, which is good news for the coal business but bad news if you’re living in, say, India’s Bihar state, where three out of four households don’t have electricity.

“Energy prices will need rise to the level at which the marginal consumer of fossil fuels is incentivised not to be a consumer,” Redburn reports. “In other words, the 1 to 2 billion people on the planet with zero or unreliable access to modern energy would remain priced out of the market.”

Guide to being ethical — do NOT what the Greens do:

Redburn’s analysts turn the ­tables on so-called ethical investors by forcing them to confront the consequences of fossil fuel ­divestment, a phenomenon that has swept university campuses, shareholder meetings and boardrooms, much as anti-alcohol mania did a century ago.

“Given the pernicious consequences of energy undersupply, we would go so far as to argue that the socially responsible investor has a duty to ensure capital is available to the fossil fuel industry, for as long as it is needed,” they write.

One pities those who may have taken their financial advice from Choice, which in 2014 seized on a dismal report from the Australia Institute to predict that fossil fuel shares were heading south.

Very well said, Nick Cater in The Australian (may be paywalled).

REFERENCE The Redburn Report (paywalled? )

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