Market forces work: coal used for domestic electricity generation has declined steadily for almost two decades. This decline has also been fueled by efforts by Democratic politicians to mothball the industry as a means of tackling climate change. That’s the reality, yet Texas Attorney General Ken Paxton is leading a baseless lawsuit alleging that Wall Street “collusion” is actually driving the market.
Paxton filed the suit in November 2024, alleging a trio of asset managers, through shareholder activism in coal companies, colluded to reduce production and raise electricity prices. In recent days, federal antitrust enforcers issued a “Statement of Interest,” claiming asset managers violated the law on common ownership grounds.
Paxton’s suit alleges this conspiracy to reduce output began in 2021, however that’s when coal’s decline actually bottomed out. Actually, the Energy Information Administration notes that coal production increased between 2021 and 2022, remaining stable since then. Indeed, coal production is 17.5% higher today than it was just one year ago. The suit notes that coal prices have risen over the past four years, but not at an extraordinary rate.
Yes, antitrust enforcers have a responsibility to hold accountable asset managers who undermine their fiduciary duty to push harmful environmental, social, and governance policies. However, it makes no sense for shareholders in a coal company to cut coal output and profitability, as it would soften stock prices and hurt shareholders. This outcome violates an asset manager’s fiduciary responsibility to act in the client’s best interests.
A recent report published by the American Legislative Exchange Council on state electricity prices notes many of the plaintiffs in Paxton’s suit have some of the cheapest prices in the country, contrary to the lawsuit’s claims. This includes Wyoming (1st), Nebraska (5th), Iowa (8th), West Virginia (10th), and Texas (15th). Coal makes up a plurality of electricity generation in Wyoming, Nebraska, and West Virginia.
It’s important to note that coal’s decline correlates with the surge in natural gas use, as natural gas generation plants are more efficient compared to older coal plants. This is good for ratepayers, especially as demand continues to outpace supply. Today, natural gas is 43% of our total electricity generation, doubling since 2010. Although many states have shifted away from coal, it is understandably still the largest generation source in a handful of coal-producing states.
The only conspiracy in the energy sector is the desire of radical environmentalists to use government power to eliminate coal from the grid. That’s why Presidents Barack Obama and Joe Biden sought to institute burdensome environmental regulations on coal while providing generous subsidies to renewables. Recall Michael Bloomberg’s $500 million campaign to close all coal plants, or Hillary Clinton’s pledge to “put a lot of coal miners and coal companies out of business?”
Progressive policymakers like New York City’s Comptroller Brad Lander have demanded Vanguard, State Street, and BlackRock exit or scale-back their large investments in fossil fuels. In fact, Comptroller Lander proudly proclaims he “led NYC’s pension funds to fully divest from fossil fuels—the only major U.S. system to do so.”
Progressives want asset managers to defund their investments in fossil fuels and AG Paxton’s case would accomplish the left’s goal. Should Texas’ suit be successful, asset managers would be required to divest their holdings—meaning their clients’ funds—from a handful of coal companies. Such a result would be a government-directed reallocation of capital out of America’s energy markets at a time when more private investment and capital is needed. Neither helps achieve President Trump’s energy dominance agenda.
Institutions and their clients—often state pension funds—are stuck walking a tight rope in an ever-changing political environment. Asset managers shouldn’t be pointed to, or away, from certain industries, they should just invest in sectors that will deliver returns for their investors, and ultimately, taxpayers.
As is so often the case, antitrust cops are focused on the wrong targets. It might make for good headlines to score political points on asset managers, but Paxton’s claims are still nonmeritorious and will likely be a waste of resources. Should the government decide to investigate seriously, it should look into the environmental non-governmental organizations and their insidious relationships with federal agencies. They’ll soon dig up the real reason coal is under fire.