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  • futureripplemovers futureripplemovers Jan 20, 2014 8:49 PM Flag

    HSBC says $20bn market value of coal assets at risk

    HSBC says $20bn market value of coal assets at risk

    By Giles Parkinson on 20 January 2014

    A new report from leading investment bank HSBC says the market value of the coal assets owned by Australia’s biggest mining groups could be slashed by nearly half – or more than $US20 billion.

    The report by HSBC, an update of a previous assessment conducted in 2012, suggests that BHP Billiton has the biggest exposure in nominal terms – nearly $8 billion. Other companies to be affected are Rio Tinto, Anglo American and Glencore Xstrata.

    The valuations are based around the potential impact of a “carbon budget”, a concept that HSBC says is gaining traction globally given the latest climate science, and because the pollution control policies in the two biggest economies and energy consumers, the US and China, are starting to bite.

    The International Energy Agency has said that if climate targets are to be met, only 20 per cent of global coal reserves can be developed by 2050 without carbon capture and storage in its low-carbon scenario. The remaining reserves (and resources) would, in effect, be ‘unburnable’.

    The UN-sponsored IPCC also concluded that the global economy has a one trillion tonne (1,000Gt C) budget from the beginning of the Industrial Revolution to the end of the 21st century. But only 269GtC is currently left, a fraction of the 779GtC embedded in fossil fuel reserves.

    “For investors, the key will be how this diminishing budget is distributed between regions and sectors, and how it impacts capital allocation for both low and high-carbon investments,” HSBC writes in the report “Coal and Carbon Revisited”

    “The latest climate science has reemphasised that the carbon contained in global fossil fuel reserves is far greater than the available ‘carbon budget’ for the rest of the 21st century.

    “Coal is particularly exposed as it is the most carbon- intensive fuel. In addition, this long-term carbon risk has converged with other factors that are placing

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