Investors have a new tool to engage with power companies in an effort to push utilities toward a generation profile that is compliant with the Paris Agreement on climate change signed by nearly 200 countries in late 2015.

The Carbon Tracker Initiative, a team of financial specialists highlighting investment risks associated with climate change, released a set of company profiles focused on Paris alignment that uses least-cost, asset-level methods to model a competitive market where high-cost coal generators are forced to shut down before low-cost generators. The profiles aim to help investors to better understand a company's use of capital in the context of alignment with international climate change goals.

"Part of the purpose here is really to try and remove some of the information asymmetries that exist between companies and investors about operations plans and the economics of different categories of power generation sources," said Henrik Jeppesen, head of North American investor outreach for Carbon Tracker. "The whole purpose is really to equip and help investors with better engagement information to make sure investors are putting forth the right questions to the companies and companies are answering the questions that the investors want them to answer."

For example, the company's analysis concluded Exelon Corp. is Paris-aligned because it has no operating coal capacity. On the other hand, Carbon Tracker found Dominion Energy Inc.'s coal phase-out plan to be either "unannounced or totally insufficient," while Duke Energy Corp.'s announced partial coal phase-out plan is "inconsistent" with goals of keeping the rise in global temperatures to below 2 degrees C.

Despite the U.S. announcing plans to retreat from the Paris climate accord and the Trump administration rolling back limits on carbon dioxide emissions, power generators across the country have continued with plans to retire coal-fired power plants. Activist campaigns also continue to report success in convincing investors and other parties such as insurer Chubb Ltd. to distance themselves from the coal sector.

Carbon Tracker is a research adviser to Climate Action 100+, or CA100+, a five-year investor initiative launched in late 2017 that holds over $33 trillion in assets under management and aims "to ensure the world's largest corporate greenhouse gas emitters take necessary action on climate change."

None of the companies with coal-fired power capacity are Paris-aligned based on the Carbon Tracker methodology, meaning there is a significant transition risk due to strong competition from renewable energy resources, the organization wrote in a July 11 analyst note. The analysis outlines the extent that coal capacity is at risk of becoming financially obsolete due to producing negative EBITDA or economically obsolete in that it is noncompetitive on a levelized cost of energy or long-run marginal cost basis.

Companies such as Peabody Energy Corp., the largest coal miner in the U.S., have pointed to major coal consumers such as China, India and Japan turning to high-efficiency, low emissions coal plants as potential pathways to reducing emissions to comply with the Paris Agreement. In its public statement on climate change, the company said carbon capture utilization and storage technologies that would eliminate or reduce carbon dioxide emissions from coal plants should be targeted for deployment incentives to help meet targets of the Paris Agreement.

"We don't see carbon capture being cost-effective, especially when it comes to being cost-competitive with renewable energy and even gas," said Durand D'souza, a data scientist with Carbon Tracker and co-author of the July 11 analyst note.

Under the Carbon Tracker methodology, a company must have a coal retirement schedule consistent with a "credible climate scenario," such as the 2 degrees scenario from the International Energy Agency, and have a retirement date assigned to each coal unit.

"Transition risk depends on the region, and thus the regulatory context, the power utility is operating in," the July 11 analyst note states. "However, whether a regulated or liberalized market, coal capacity will be — or already is — a high-cost option for power generation relative to wind and solar PV."

Carbon Tracker said it took on coal-fired capacity first because it represents 80% of emissions from power generation, with plans to tackle gas-fired power generation in the future. The company profiles cover about 95% of global coal-fired operating capacity and about 90% of capacity under construction. The assessment tool is publicly available on Carbon Tracker's website.