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Trump to Relax Emission Rules: Will Coal Industry Benefit?

Ritujay Ghosh
Updated
The plan to overhaul the emission rule is by far going to be President Donald Trump's biggest move to revive the ailing U.S. coal industry.

The Trump administration is planning to propose an overhaul of Obama-era rules on carbon dioxide emissions. The new plan would allow individual states to decide on how to curb carbon dioxide emissions from coal plants. Naturally, the plan would allow coal producing states to relax pollution rules for power plants with the aim of helping ailing coal plants.

At the same time, it would also weaken the Clean Power Plan, initiated by former president Barrack Obama to put a check on pollution. That said, the to-be-proposed plan has been cheered by the American Coalition for Clean Coal Electricity, a trade group representing coal producers, which feels that such a move will help the ailing coal plants. 

The Plan and its Implications

The Trump administration is likely to propose a plan with new guidelines this week that will allow states to decide on how to curb carbon dioxide emission from coal plants. This will considerably weaken the Clean Power Plan, drawn during Obama’s tenure to check global warming from carbon dioxide emission from coal plants.

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However, the regulation was blocked temporarily in 2016 by the Supreme Court, while a federal court was hearing arguments from a coalition of coal-producing states after they sued to block the regulation. Understandably, the new plan will bring a much-needed relief for the ailing coal industry.

At the same time, the move to relax pollution rules for power plants will also increase the risk of pollution levels increasing once again due to higher carbon emissions. According to The Washington Post, the change in rules is likely to release 12 times the amount of carbon dioxide into the atmosphere compared to the Obama rule over the next decade.

Trump’s Biggest Move to Revive the Coal Industry

The plan to overhaul the emission rule is by far going to be Trump’s biggest move to revive the ailing U.S. coal industry. Trump had pledged to revive the U.S. coal mines during his election campaign. U.S. coal mines have lost more than 125,000 jobs since 1985. Moreover, coal-fired power generation has declined by almost one third since 2010 given the competition from renewable energy and low-cost gas unlocked by the shale revolution. 

Naturally, the move has been cheered by the American Coalition for Clean Coal Electricity, which believes that the Obama era rules were stringent. Coal producers feel that Trump’s push to order grid operators to purchase electricity from coal plants along with new emission standards will help the industry.

Shares of coal-producing companies like Cloud Peak Energy Inc. CLD and Peabody Energy Corporation BTU jumped 4.4% and 0.9%, respectively on Aug 17. Shares of CONSOL Coal Resources LP CCR and Alliance Resource Partners, L.P. ARLP gained 1.2% and 0.5%, respectively. CONSOL Coal Resources sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Trump’s move will definitely encourage U.S. thermal power producers, which had been complying with stricter emission rules, as the new plan is likely to make coal plants more competitive in electricity markets. This saw shares of Dominion Energy, Inc. D, Duke Energy Corporation DUK, Exelon Corporation EXC, The Southern Company SO gain 0.9%, 0.6%, 0.5% and 0.2%, respectively, on Aug 17.

Summing Up

The new proposal, which is most likely to be announced as early as on Aug 21, which coincides with Trump’s rally in West Virginia, the heartland of coal, will be subject to a 60-day comment period. While the new plan would help coal-producing states to relax carbon emission norms, which definitely is being done with the aim of reviving the long-suffering U.S. coal industry, it definitely will also increase the risk of pollution level shooting up once again.

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Exelon Corporation (EXC) : Free Stock Analysis Report
 
Southern Company (The) (SO) : Free Stock Analysis Report
 
Duke Energy Corporation (DUK) : Free Stock Analysis Report
 
Dominion Energy Inc. (D) : Free Stock Analysis Report
 
Peabody Energy Corporation (BTU) : Free Stock Analysis Report
 
Cloud Peak Energy Inc (CLD) : Free Stock Analysis Report
 
Alliance Resource Partners, L.P. (ARLP) : Free Stock Analysis Report
 
CONSOL Coal Resources LP (CCR) : Free Stock Analysis Report
 
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