The outcome of the US Presidential election, in November, will determine the trajectory of the country’s environmental regulations and whether operating costs for the mining industry over the coming years will be increased or decreased, says research firm BMI, a unit of Fitch Group.

The firm holds that a win for the Democratic Party will result in policy continuity, tightening environmental regulations and, therefore, the raising of costs for miners. However, a Republican Party win would result in an immediate cessation of “antagonistic” legislation towards coal and provide some respite for miners.

“In either scenario, we do not expect to see a reversal in the decline of the US coal industry. A best-case scenario for the mining industry as a whole would be a return to value growth before 2018, which is our current forecast. Nonetheless, this upside risk remains far more contingent on mineral price recovery than it does on coal-friendly legislation,” says the research group.

BMI states that the tightening of US environmental regulations throughout President Barack Obama’s administration has had clear implications in the mining industry, such as raising costs and edging coal out of the country’s power mix.

Clinton: A Managed Decline for Coal

The research company notes that Democratic nominee Hillary Clinton has stated that she will expand on environmental policies, such as the Clean Air Act and the Stream Protection Rule.

Clinton’s running mate choice, Tim Kaine, is a nod to coal country, as his environmental record is “not squarely liberal”. BMI points out that he has supported offshore drilling and the coal industry in his home state of Virginia. Nonetheless, the firm highlights that this represents more of a proverbial olive branch to the coal sector for political support in a weak spot for Clinton rather than a tangible plan to revive the industry.

“Both Republican nominee Donald Trump and Clinton have expressed support for clean coal technology, including scrubbers, carbon capture and storage facilities, although government investment continues to favour renewable energy over clean coal,” BMI says.

Trump: Easing of Environmental Regulations

The research house states that a Trump win would provide “some respite” for the mining sector, compared with Clinton, although this scenario will not necessarily be a boon, as there are other headwinds facing the sector.

BMI says that, most notably, a Trump Presidency would bring an immediate halt to the barrage of ‘green’ legislation, albeit not necessarily a repeal of it. The researcher remarks that, overall, the impact of a Trump Presidency on the US mining industry remains obscured by the candidate’s lack of clear announcements on the topic.

The research firm says that Trump’s call to dismantle the US’s Environmental Protection Agency for overregulating the coal industry remains “unlikely” owing to a lack of widespread Congressional support for such a move. Further, the Republican nominee would not have the legal authority to repeal the climate rules established by Obama. BMI adds that Trump has also “incorrectly” promised to overturn the nonbinding Paris climate agreement.

The research company comments that, while Trump has also promised to “return coal jobs”, global market trends render this unviable. BMI expects a surge in natural-gas-fired power generation and a fall in coal-fired power in 2016, owing to large retirements of coal-fired power plants and the historically low price of natural gas to accelerate the replacement of coal by gas as the main component of the US generation mix by 2018.

“Therefore, the US coal industry will continue to see consolidation, divestment, lay-offs and bankruptcy, owing to persistently weak thermal and metallurgical coal prices, significant coal stockpiles and competitively cheap natural gas,” the research firm concludes.