By COLE LAUTERBACH for THE ILLINOIS RADIO NETWORK
SPRINGFIELD, Ill. (IRN) — A new analysis from credit rating agency S&P predicts cities in areas like Southern Illinois must get ready for “credit challenges” as money moves out of coal.
As investors, both in public and private sectors, make an effort to invest in things like renewable energy, S&P said coal-reliant areas could experience added budget pressures due to a loss of not only tax revenue should a mine or coal-fired plant close, but the also the local tax base after workers leave the area for other opportunities.
“In S&P Global Ratings’ opinion, reliance on coal-related revenue and economic activity, absent diversification, may result in long-term credit deterioration for some U.S. government entities,” the report said.
Specifically to Illinois, the authors pointed out that coal accounts for less than 1 percent of the state’s GDP and the state doesn’t collect a severance tax on coal. This, the authors said, would ensure that the decline of the coal industry in Illinois would have a minimal effect on the state’s overall economy.
Southern Illinois, however, would be one of the more intensely-affected regions.
“In localized areas where there is a power plant closure, where there is a mine closure, that can have a more negative economic impact in that area,” credit analyst Timothy Little said.
U.S. coal production is in decline, with half of those operating in 2008 having been since shuttered, but Illinois’ coal production has bucked that trend, according to S&P.
“Over the past decade (2007-2018), production increased 52% compared to declines or flat production in the nine other major coal-producing states and a 34% decline in coal production nationally,” the report said, attributing that increase to strong export demand and relative ease of extraction compared to other areas.
The report’s ominous warning is due, in part, to a larger movement of ethical investing referred to as environmental, social, and governance, or ESG, initiatives that focus on sustainability factors among other issues.
“The ESG components to our ratings are just as important as some of the financial metrics that are key,” S&P analyst Kurt Forsgren said