While the S&P/ASX 200 Index (ASX: XJO) climbs higher today, energy shares are holding the market back. In afternoon trade, coal shares are treading in negative territory after almost 200 countries from around the world agreed on a new climate deal at the COP26 summit yesterday.
At the time of writing, shares in Yancoal Australia Ltd (ASX: YAL), Whitehaven Coal Ltd (ASX: WHC), and New Hope Corporation Limited (ASX: NHC) are down 1.8%, 1.6%, and 0.5% respectively.
Doubt has been cast on the future of coal mining following the latest development.
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ASX 200 in the green as 'death knell' sounded for coal power
A final agreement on global coal-fired energy production was reached over the weekend after an arduous process of negotiations. The deal, which includes 197 countries, has been labelled the most ambitious climate pact since The Paris Agreement in 2015.
In a bid to keep global warming at bay, ASX-listed coal shares are feeling the heat today. The deal is hoped to keep the world on track to cap global temperature rises at 1.5 degrees Celsius above pre-industrial levels.
While the terminology didn't end up being exactly what some had hoped for, it is still being heralded as a major milestone. For instance, United Kingdom Prime Minister Boris Johnson inferred the deal is a deadly blow to the coal industry, stating:
Together, it is beyond question that Glasgow has sounded the death knell for coal power. It's a fantastic achievement and it's just one of many to emerge from COP26.
Johnson's sentiment of impending doom coincides with energy shares weakening today. However, ASX 200 healthcare, consumer discretionary, and tech shares are leading the Aussie market higher.
The final deal that was agreed upon involves a "phase down", rather than a "phase out", of fossil fuels. This was the result of objections from India. In turn, other nations have warned the alteration will make it harder to achieve international targets.
Although, the semantics weren't of concern to the executive director of Greenpeace International, Jennifer Morgan. The head of the global campaigning network noted the importance of the deal, stating:
They changed a word but they can't change the signal coming out of this COP, that the era of coal is ending. If you're a coal company executive, this COP saw a bad outcome.
ASX coal shares still ahead
Although the agreement sets a bleak outlook for companies in the coal-powered space, shares are still far ahead year on year.
A widespread energy shortage has bolstered fossil fuel shares over recent months. As a result, numerous coal shares have outperformed the ASX 200 over the last year.
