Whitehaven Coal shares are on fire, but could there be a looming risk?

A businessman smashes his laptop with a hammer because it is on fire.A businessman smashes his laptop with a hammer because it is on fire.

The Whitehaven Coal Ltd (ASX: WHC) share price is on the rise again today, but could there be challenges ahead?

Whitehaven Coal shares are leaping nearly 2% today and are currently trading at $9.13. For perspective, the S&P/ASX 200 Energy Index (ASX: XEJ) is down a painful 3.26% today.

So what looming development could impact Whitehaven coal shares?

Could New South Wales implement a coal tax?

Whitehaven shares have exploded 250% since the start of the year. Whitehaven reported a $2 billion net profit after tax (NPAT) in FY22.

However, TAMIM Asset Management Australian equities head Ron Shamgar has warned of the prospect coal producers could face a new tax next year, potentially impacting Whitehaven and New Hope Corporation Limited (ASX: NHC). In a tweet, Shamgar said:

One risk to keep in mind in the coal trade and $WHC and $NHC is that it’s certain the NSW government will impose an additional tax on coal producers next year, but unlike Qld gov, they will do it in consultation with the industry. That’s my prediction.

Queensland has a three-tier coal royalty tax system that has been in place since 1 July 2022. When coal prices hit $175 to $225 per tonne, 20% tax is charged. This rises to 30% when the coal price lifts to $225 to $300, and 40% when the average coal price per tonne is more than $300.

Australian Institute economist Rod Campbell is calling on the NSW Government to follow this path and implement a higher tax burden on the coal industry. In quotes cited by The Guardian, he said:

This is absolute textbook economics on what you should be taxing.

You should be taxing the things you want less of – fossil fuel production – and you should tax higher when profits are over and above a normal return to capital.

NSW currently charges a coal royalty of between 6.2% and 8.2%, depending on the method of mining.

Whitehaven operates four coal mines in the Gunnedah Basin of NSW. The company is also developing the Winchester South coal project in Queensland.

Whitehaven Coal share price snapshot

Whitehaven coal shares have soared 194% in the past year, while they have risen 21% in the past month

For perspective, the ASX 200 energy index has grown 28.6% in the past year.

Whitehaven has a market capitalisation of around $8.7 billion based on the current share price.

The post Whitehaven Coal shares are on fire, but could there be a looming risk? appeared first on The Motley Fool Australia.

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Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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