Phasing out coal

On the topic of climate change, much is written about the continued use of coal for power.  There is a widely accepted view from many actors, including climate scientists and NGOs, that coal will need to be phased out completely in order to successfully transition to the low carbon economy.  https://unfccc.int/news/paris-agreement-triggers-divestment-from-coal-study

However, this is not without complexities.  Across the globe new coal fired power stations are still being built – in some cases being funded by European financiers.  I am intrigued as the treatment of coal power is just one example of the tough decisions which will need to be taken with respect to climate change, particularly in the context of economic growth.

Many developed countries have benefited economically from coal powered energy.  For example, the industrial revolution in the UK.  In much of the developed world coal is now being phased out and cleaner alternatives rapidly being sought.  However, in some developing countries a growth in coal power is still being supported – it is argued the context is different in these countries.  This different context is due to a perceived lack of practical alternatives to coal (E.g. existing individual diesel generators, no electric grid infrastructure) and due to the fact industrialisation has not yet taken place.  I am mindful it is very easy to have a European-centric view of the world and see turning coal off immediately as obvious – the decision may not be that simple if you had not benefited from the prosperity it is perceived to bring.

In my view listening to scientific research with regards to coal is important, specifically avoiding negative consequences.  Cleaner alternative should certainly be sought – the cost of renewables coming down will support this.  Engaging with companies and governments who continue to support coal is also key – where possible reducing or containing emissions of existing coal power and developing so-called clean coal may possibly offer solutions…  Having tough conversations in a non-adversarial manner is critical, listening and communicating effectively with actors on both sides of the debate to ultimately figure out solutions. 

Happy to hear any thoughts, particularly where there is a tension between coal power and economic development in developing countries…

2 thoughts on “Phasing out coal

  1. Thank you for your blog 4littlelucas. As you mention it is quite a difficult debate in Africa and in other emerging markets. It’s also top of mind for many emerging market banks and DFIs, as they consider their position on funding coal-powered stations, usually as part of their climate change policy.

    In fact, it was discussed recently by the Chairman of Standard Bank (Africa’s biggest bank) in their integrated report, see page 31 at: https://annualreport2018.standardbank.com/documents/air-2018-annual-integrated-report.pdf

    He highlights some of the trade-offs to consider. On the one hand there’s the negative impact of coal-powered stations on emissions/climate change, plus the potential reputational risk of funding them and credit impairments from ‘stranded assets’. Against this, there’s the need for affordable energy, with large coal reserves in many African countries. Moreover, in some cases the alternatives like parafin lamps and wood fires aren’t great either, as they’re dangerous and also pollute.

    In addition, alternatives like solar and hydro can’t provide baseload power, so coal is likely to remain in the energy mix for Africa for some time. Some countries plan to decommission older stations in the next 10 years, while rolling out renewables, which will reduce the proportion of coal in their energy.

    Increasingly though, the price of solar is reducing, and in some cases is below the new build cost of coal-powered stations. And they can be built far quicker. However, it is still expensive to store the energy, if you want to use it at night time for instance.

    There’s also the issue of a “just transition” to consider, where coal miners, truckers etc, need to be re-skilled. Apparently solar power requires far fewer and generally more highly skilled workers.

    I’m interest to see that some banks who announce they won’t fund coal-powered stations, including the caveat ‘new’ deals, which enables them to still finance deals that have already been approved.

    For listed banks you also have the additional pressure of needing to grow revenue and earnings to meet market expectations (usually short-term i.e. the next year). And often government is a large client of yours and they expect you to support their energy plans (usually involving coal).

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  2. Great blog post! Something I’m really interested in is the wider context of your discussion, specifically the different contexts of developed and developing regions. Like you say, developed regions have done so over the past hundreds of years at great cost, not only to the environment but to wider society as well. From the working poor in slums through to child labourers and the colonisation and exploitation of other countries, western wealth has been built on practices which are pretty much the opposite of what we strive for as sustainability practitioners. Personally I believe it’s unfair on developed countries – who are now wealthy – to push their “higher” values on to nations who still need to undergo development to improve their people’s lives. At least, not without a helping hand. Having said that, it’s really interesting to hear you say that coal initiatives are being funded by European financiers. What a conundrum. Do you help these nations achieve their national energy strategies or take a stand and send them the message that you think they are wrong and being insensitive to their circumstances? I guess there’s no easy answer, it’s a trade-off between achieving environmental targets and societal targets, not to mention respecting national sovereignty. The problem is that the societal benefits will be realised more directly and in the shorter term compared to the environmental damage, making it easier to kick the environmental ball down the road. There’s no easy answers, but I do believe there is a responsibility for developed nations to support environmentally sustainable development in less developed regions, whether that be through state aid or other means.

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