Ford Motor Company (F), Tata Motors Limited (ADR) (TTM): As China Goes Green Is Coal Fading to Black?

If China did just pass an environmental and economic tipping point, there could be big changes in store for the energy world. China consumes nearly as much coal as the rest of the world combined, and current estimates predict a more than twofold increase in the country’s consumption by 2035.

Source: eia.gov

Over the next couple decades, China and India are expected to account for more than 75% of coal-based energy demand. With dwindling demand in the states, coal companies are betting on China’s addiction to their solid black gold. China accounted for 6.8% of Peabody Energy Corporation (NYSE:BTU)‘s 2012 sales, a 242% increase over 2011’s numbers. Arch Coal Inc (NYSE:ACI) pulled 18% of its 2012 revenue from Asia, and as CONSOL Energy Inc. (NYSE:CNX) Chairman and CEO J. Brett Harvey said recently:

And remember, it’s demand for energy. It’s not the ability to serve the customer. The demand is just not there, and we think China’s turning a little bit, and that looks pretty strong. As Jim talked about, our inventories there have dropped right inside of China, and we’re optimistic. But it’s a little bit dicey, yet. I wouldn’t give a robust look, but I can tell you we’re cautiously optimistic.

The future of coal
Kuznets didn’t envision the end of coal, and neither do I. But China’s new greenification should serve as a warning sign for China bulls to take off their energy blinders. My crazy prediction: By 2035, China’s demand for coal will be…exactly what it is today. Here are three reasons why:

1. China’s lackluster energy efficiency and productivity will improve dramatically.

2. Domestic production and liquefied natural gas imports will significantly increase China’s natural gas consumption.

3. China’s technology leap will aid its first-mover position on cost-competitive alternative energies and smart grid adoption.

Coal stocks are breathing on the fumes of future consumption. Policy moves fast in China, and investors should be well aware that China’s legislation light may have just turned green.

The article As China Goes Green Is Coal Fading to Black? originally appeared on Fool.com and is written by Justin Loiseau.

Fool contributor Justin Loiseau has no position in any stocks mentioned. You can follow him on Twitter, @TMFJLo, and on Motley Fool CAPS, @TMFJLo.The Motley Fool recommends Ford. The Motley Fool owns shares of Ford.

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