Main content

How Climate Change Will Impact Bankruptcy in 2018

By Ryan Bouley

The threat of continued global warming has meaningful implications for the entirety of the energy industry. Law360 reports that “climate change issues are beginning to make an appearance in corporate bankruptcy cases, with companies citing environmental regulatory obligations and unusual weather events as contributors to their predicaments, and the frequency of such cases is expected to accelerate with smaller regional business suffering the most at first.”

Certain power producers will stand to benefit as electric powered transportation grows and retail providers — faced with the uncertainty of increasingly unpredictable weather patterns — must scramble to buy excess capacity at a premium in the spot market to meet committed and uncapped supply agreements. In this regard, those with the most to gain are the generators who rely on renewable and cleaner option sources.

Wind, solar, and hydro producers will likely benefit despite their relative inefficiencies versus more traditional feedstocks, though natural gas and nuclear power will continue to anchor the power generation space, at least in the near future.

On the other hand, coal producers — already out of favor due to high transportation, labor, and compliance costs and the threat from cheap natural gas — will further suffer from the growing consequences of environmental compliance and legislation favoring alternative solutions.

Similarly, as the demand for electric vehicles grows, the oil heavy fossil fuel producers and their dependents, including oilfield service providers, pipeline companies, and refiners, will be at risk as oil production and prices are each compressed.