Everyone knows we need to burn less coal. The world’s 8,500 active coal plants remain the single largest source of electricity and the single largest contributor to global emissions. Having fuelled the world since the beginnings of the industrial age, coal is responsible for more than 30% of the average global temperature rise above pre-industrial levels, estimates the International Energy Agency (IEA).
The Intergovernmental Panel on Climate Change suggests that coal use in electricity generation must fall 80% below 2010 levels by 2030, with OECD nations ending coal use entirely by 2030 and the rest of the world doing so by 2040. Yet the IEA’s Coal 2021 report, released in December 2021, showed things moving in the opposite direction. With electricity demand outpacing low-carbon supplies, and soaring natural gas prices on top, coal generation is estimated to have reached an all-time high in 2021.
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Nevertheless, from a policy perspective, coal has undergone a major shift. Countries across the OECD have seen their coal use decline significantly in recent years, while the global pipeline of proposed coal power plants has collapsed by 76% since the Paris Agreement. At COP26, some 23 countries made new commitments to phase out coal, including major Asian coal nations such as South Korea, Indonesia and Vietnam.
However, while making such commitments is one thing, delivering on them is another. “The first key thing for any phase-out commitment is to actually make that commitment a reality, and to do so at a pace that is consistent with keeping global temperature increase below 1.5 degrees,” says Camilla Fenning, a coal analyst at think tank E3G. At the moment, announced phase-outs are not all in line with the temperature target. At least six European countries have a coal phase-out target date after 2030. The Czech Republic is the most recent addition to this list, announcing a 2033 phase-out date on 7 January 2022.
As well as happening at pace, coal phase-outs need a good plan. Solving the Coal Puzzle, a report from pressure group Europe Beyond Coal and think tanks Ember and Sandbag, suggests what constitutes a good phase-out. The authors say a phase-out should be “direct” – avoiding any “bridge” to natural gas or unsustainable biomass – and “clean”, with plans explicitly laying out how wind and solar will replace coal. In addition, plans should be enshrined in law and close the dirtiest plants first. This should be done in a “reliable” manner that keeps the lights on. Finally, they should be “economic” – avoiding pay-offs to utilities (as is happening in Germany) and ideally making use of a high carbon price in an emissions trading scheme – and they should be “just”, with no workers left behind.
“A good phase-out features a broad set of complementary policies with the objective of a decarbonised system,” experts from the Regulatory Assistance Project told Energy Monitor in a statement. “A failure to plan comprehensively can lock us into costly and wasteful policies that are not aligned with long-term decarbonisation goals.”
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By GlobalDataComparing national records
Analysis of macro energy data from Energy Monitor‘s parent company GlobalData shows there has been a major divergence in how OECD countries have replaced coal, with different countries faring better in different areas.
Denmark has seen coal’s share in the electricity mix rapidly fall from 46% in 2000 to just 6% in 2020, and the country has not used natural gas as a significant bridging fuel. Although biomass generation soared from 5% in 2000 to 24% in 2020, according to data from GlobalData, the country has strict rules around what can be used; as of 2021, for example, the only woodchips that can be burnt are those from sustainably managed forests in countries where forests are not in decline.
Denmark’s coal phase-out target is set for a relatively late 2028 – but with coal’s share of electricity generation plummeting 90 percentage points since the mid 1980s, the country represents a good model of how a direct, reliable and relatively clean transition can take place.
Another country that is replacing coal directly with renewables is Germany, which has seen the share of coal and gas in electricity generation decline by 23 and four percentage points, respectively, between 2000 and 2020, as wind and solar’s share has increased. However, Germany’s decline in coal use has been much slower than Denmark's. Germany remains the world’s fourth-largest user of coal, with a coal phase-out date of 2038, until the new coalition government announced it would be moved to 2030 in November last year.
A 2020 study from the German Department of Energy highlights how a generous coal subsidy regime and enduring union power, as well as historic concerns over high electricity prices, import independence and grid stability, have contributed to the slow phase-down. Angela Merkel’s recommitment to a nuclear exit following the 2011 Fukushima Daiichi nuclear disaster has also meant enduring demand for coal’s baseload power supply.
The UK once found itself in a similar position to Germany, with a large electricity grid that was majority-powered by coal. Like Germany, that coal originated from long-established mining communities that employed hundreds of thousands of unionised miners. However, by not using public funds to subsidise domestic mining in the 1980s, Margaret Thatcher’s Conservative government presided over a rapid decline of domestic coal production, and soaring imports.
The UK’s coal transition scores badly when it comes to a just transition, with many mining communities still struggling to establish new industry. However, the transition did mean that, since climate policies were introduced in the 21st century, there has been much less resistance to the roll-out of policies to accelerate coal’s decline, according to the authors of the German Department of Energy study.
However, unlike Germany, gas has been used as a bridging fuel in the UK in a major way, with generation increasing from 5.8 terawatt hours (TWh) in 1991 to 176.2TWh in 2008. Although it produces around half as much carbon when burnt as coal, gas has received increased critical attention in recent years as the policy focus has moved away from reducing emissions to reaching net zero in just a few decades.
'Why gas is the new coal’, a November 2021 report from think tank Climate Analytics, found that gas was the largest source of a fossil fuel carbon emissions increase (42%) from 2010–19, and is responsible for 70% of the projected increase in fossil fuel carbon emissions under current policies to 2030. “Gas is not a ‘bridging fuel’, it is still a fossil fuel,” write the authors. “To reach the Paris Agreement’s 1.5˚C warming limit, governments, investors and multilateral finance institutions must treat it the same way they do coal: target gas for a swift phase-out.”
As Europe looks to phase out the remainder of its coal capacity over the next decade, there remain fears gas will linger in the electricity mix. EU plans to label investment in new natural gas or nuclear as “sustainable” have recently prompted a furious backlash – Mahi Sideridou, managing director of Europe Beyond Coal, told Energy Monitor the label is “nuts”.
“Phasing out coal is a narrow view,” suggest experts from the Regulatory Assistance Project. “Meeting long-term goals requires a focus on decarbonising power systems, as well as transport and industry. [...] The focus on just one fuel or only the power sector is too narrow.”
Optimism for future phase-outs
The new EU taxonomy does not necessarily scupper plans for effective coal phase-outs. “The new label is obviously a shame, and a really bad international symbol, but the restrictions on the definition are so tight that I cannot imagine many gas plans would meet the criteria,” says E3G’s Lisa Fischer. She points to how many investors who would use the taxonomy – including Barclays, Allianz, BNP Paribas and Santander – have signalled a lack of support for the inclusion of gas.
The new German coalition government also announced at the start of January that it would join the US, UK and Canada in targeting 100% low carbon electricity by the mid-2030s, most likely scuppering any plans for new gas power plants, which typically have a a lifespan of three or four decades.
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Whatever the EU may say, there is a sense within the industry that gas is moving towards the same fossil fuel doghouse as coal. “I think everyone, even in Asia, now understands coal needs to be replaced with clean electricity,” says Ember’s global programme lead Dave Jones. “All reference to coal at COP26 was in that context. If fossil gas was a bridge fuel once, it certainly isn't now.”[Keep up with Energy Monitor: Subscribe to our weekly newsletter]Whatever the EU may say, there is a sense within the industry that gas is moving towards the same fossil fuel doghouse as coal. “I think everyone, even in Asia, now understands coal needs to be replaced with clean electricity,” says Ember’s global programme lead Dave Jones. “All reference to coal at COP26 was in that context. If fossil gas was a bridge fuel once, it certainly isn't now.”
Fischer points out that gas power is not cost-competitive with renewables in many markets, and is subject to price instability that is unattractive to investors, as exemplified by the soaring price of gas this winter. An October 2021 report from think tank Carbon Tracker also found that more than a fifth of European gas-fired power plants and a third of US gas units are loss-making. “Most new build gas capacity planned will be unable to recover initial investment and should be cancelled,” the report concluded.
While coal phase-outs so far have largely been the result of rich countries pursuing domestic energy policies, there are now programmes to ensure effective coal phase-outs elsewhere. These include the Coal Asset Transition Accelerator, which was launched at COP26 to leverage finance to accelerate the coal transition globally. It will link governments and utilities in transitioning countries with renewable energy developers, financial institutions and donors.
The Powering Past Coal Alliance (PPCA) was launched in 2017 to “secure commitments from governments and the private sector to phase out existing unabated coal power”. The alliance now has 165 members that include governments, businesses and other organisations. It “stands ready to support developing countries in their transitions, by connecting them with appropriate technical and financial support to maintain security of energy supply, address affordability and pricing concerns, and promote a just transition and tackle broader development challenges,” says the PPCA’s Anna Drazkiewicz.
With all major economies set to phase down coal over the next few decades as they work towards their net-zero pledges, countries have seen that the benefits of baseload fossil power are eclipsed by the climate and financial risk of coal assets. “Developing countries will be left in an extremely bad position in the coming years if coal power is not phased out, with stranded assets they cannot afford and other markets unwilling to purchase products manufactured using carbon-intensive electricity,” says E3G’s Fenning.
However, ensuring phase-outs happen in a timely and equitable manner remains a complicated challenge, which all stakeholders must work hard on together to reach the best outcome for people and planet.
