Business 25 January 2021 How coal’s uneven retreat threatens the world’s climate The sun may be setting on coal-fired power in Europe and North America, but its persistence in Asia threatens global climate targets. Kevin Frayer/Getty Images Street vendors outside a coal-fired power plant in Anhui province, China Smarten up your weekGet the New Statesman's Business email. SIGN UP King Coal has long been climate campaigners’ public enemy No 1. It is the most carbon-intensive form of power generation and it is responsible for nearly half of carbon emissions from energy use, including from fuels used for transport and heating as well as power. But with powerful lobbies from across the political spectrum – bringing together mine owners and mining trade unions – it has remained stubbornly persistent despite the threat its use poses to the global climate. The past six months have brought some good news for those eager to see coal kicked out of the energy system. At the end of the year, the International Energy Agency (IEA) announced that global consumption had fallen by around 7 per cent between 2018 and 2020. During December’s Climate Action Summit, hosted by the UK government, Pakistan’s prime minister, Imran Khan, vowed his country would scrap plans for new coal-fired power plants. His pledge follows the abandonment of coal power projects in Bangladesh, Kenya, Egypt and Vietnam. Coal has been in retreat in Europe and the US – despite President Trump’s rhetorical support for the sector – for at least the past decade. Fast-growing emerging markets have been the coal sector’s last hope for growth. Until recently, coal provided the cheapest source of electricity and was especially attractive for countries with domestic coal reserves. However, the falling costs of renewables, concerns about climate change and growing public disquiet about coal’s impacts on air quality have dulled its appeal. In recent years those countries with the largest pipelines of coal projects have rethought their plans. According to data from Global Energy Monitor, a US-based NGO that tracks coal, oil and gas projects, the pipeline of coal-fired power projects in the ten countries with the largest expansion plans – nine of which are in Asia – has shrunk by about two-thirds since 2014. “When it comes to policy decisions [and] the economics of power generation, it seems every day that the outlook for the coal industry gets worse,” says Toby Hassall, lead analyst for coal market research at the financial data provider Refinitiv. Energy Monitor: Meet Joe Biden's climate and energy team Part of New Statesman Media Group Crucial to that darkening outlook is the growing difficulty that coal-fired power plants face in raising finance. Private sector banks, under pressure from investors and activists, have been gradually pulling back from lending to coal projects (although campaigners complain that their fossil fuel exclusion policies are often not tight enough). Instead, developers had looked to concessional finance from the Chinese, Japanese and South Korean governments, whose export credit agencies were happy to lend at attractive rates to projects that used turbines and other equipment supplied by their industrial giants. “[Approximately] 90 per cent of all coal-fired power plants built in Asia in the last five years were underpinned by export credit agency finance,” says Tim Buckley, director of energy finance studies at the Institute for Energy Economics and Financial Analysis (IEEFA). All three of those countries are shutting their chequebooks, under pressure to act on climate change. But the latest IEA data comes with a sting. The Paris-based agency, part of the OECD, forecasts a rebound in coal demand of 2.6 per cent in 2021 as the global economy recovers. Global Energy Monitor data also shows a small increase in the coal power pipeline last year, as Chinese regional apparatchiks, chasing economic growth targets, waved through new project applications. Energy Monitor: Coal in Asia is fading, but not fast enough Part of New Statesman Media Group The IEA expects this recovery to be short-lived and coal use to plateau in the middle of the decade. Crucially, it sees coal demand flattening in China – the world’s largest consumer of coal and, consequently, its largest carbon emitter. China’s president, Xi Jinping, committed last September that China would become a net-zero carbon emitter by 2060, meaning it needs to decarbonise its power sector. Nonetheless, it is not enough for emissions from the sector to plateau. If climate targets agreed through the Paris Agreement are to be met, coal-fired capacity needs to be closed, rapidly. “Coal use needs to collapse 80 per cent by 2030 to hit the [Paris agreement’s] 1.5°C target,” says Dave Jones, senior electricity analyst at Ember, a climate and energy think tank, based on scenarios set out by the Intergovernmental Panel on Climate Change. This is going to be challenging, to say the least. Not only do many developing economies anticipate dramatic increases in electricity demand, decarbonising their transport and heating sectors will vastly increase the need for power generating capacity. The energy markets consultancy Wood Mackenzie estimates that if China, for example, is to meet its carbon-neutral target, electricity demand will be 71 per cent higher in 2060 than under its base case. Energy Monitor: Why Trump failed to derail the US energy transition Part of New Statesman Media Group But two factors could drive coal off the grid in emerging markets much more quickly than campaigners fear. The first is continuing falls in the cost of renewable energy and the energy storage technologies that will help overcome the problems caused by the intermittency of wind and solar generation. As Buckley at the IEEFA notes, in December the Indian utility company Gujarat Urja Vikas Nigam Ltd contracted to sell power from a new 500MW solar project for 1.99 rupees/kWh (or around 2.7 US cents) – that’s less than the cost of operating an existing coal-fired plant, let alone building a new one. The second is a growing willingness to price carbon. On 1 February, China’s long-awaited carbon emissions trading scheme is due to launch, controlling carbon emissions from more than 2,000 power stations across the country. Putting a price on carbon emissions in this way can dramatically alter the economics of coal-fired power, says Christine Shearer, Global Energy Monitor’s coal programme director. “If you make that part of the equation for coal plants, then coal power, as we saw in the EU, disappears pretty quickly.” › How austerity economics is hindering Covid-19 vaccine programmes Mark Nicholls is a contributing editor at Energy Monitor. More from New Statesman Media Group Energy Monitor: Meet Joe Biden’s climate and energy team Energy Monitor: Coal in Asia is fading, but not fast enough Investment Monitor: What will Tesla do next? This article was co-commissioned with Inside the global clean energy transition visit site Part of New Statesman Media Group Subscribe For more great writing from our award-winning journalists subscribe for just £1 per month!