The COP26 climate summit is taking aim at the coal sector, as more than 40 countries pledged to quit coal in a new pact that could be one of the key legacies of the Glasgow gathering.
The agreement includes 18 countries that for the first time are promising to phase out or stop investing in new coal-fired power plants domestically and internationally, including Poland, Vietnam and Chile.
COP president Alok Sharma has vowed to “consign coal to history,” as the world’s biggest contributor to carbon dioxide emissions.
At the same time, coal prices and profitability for producers are high owing to recent shortages and rising demand for power as the global economy rebounds following the pandemic.
About $20bn in funding to help countries quit coal has been announced at the Glasgow summit this week, including a proposal to fund South Africa’s shift to clean energy. The Asian Development Bank launched a new fund that will buy coal power plants in order to shut them early.
“The end of coal is in sight,” said UK business and energy secretary Kwasi Kwarteng. “Today marks a milestone moment in our global efforts to tackle climate change as nations from all corners of the world unite in Glasgow to declare that coal has no part to play in our future power generation.”
The UK said the new initiative would help to shut down 40GW of coal power plants — enough to power 30m homes — in 20 countries.
The latest commitment relates to unabated coal power, or those plants not equipped with carbon capture and sequestration technology, however.
Cutting financing for new coal power plants has been a key goal for the COP26 summit. A coalition of about 20 countries is expected to announce on Thursday an end to any government funding for coal, both domestic and international.
According to the International Energy Agency, there are some 140GW of new coal plants under construction and more than 400GW at various states of planning.
While renewable energy sources such as wind and solar are growing rapidly, they are struggling to keep pace with rising demand for electricity and power, leaving fossil fuels to fill the gap.
As a result, coal producers are enjoying one of the best years on record as the global energy crunch has pushed prices to unprecedented levels. In Europe, coal prices, which started the year at about $70, touched $300 a tonne in October before retreating.
Coal prices have also leapt in China, where a deepening power crisis is threatening its economic growth. The country has struggled with domestic coal supply to meet the recent increased power demand as it slowly runs down coal mines and power plants for environmental and safety reasons.
While the availability of funds and insurance is a rising challenge for the coal industry, some producers remain confident they can secure financing.
“Where the economics of a project are compelling, we’ll find funding,” said July Ndlovu, chief executive of South African miner Thungela Resources.
“We might not get funding from traditional sources like a bank. But there are enough examples in other commodities that you can do some really creative things, like tie up with trader and get funding for selling your volume.”
However, many producers are already planning for a future where demand for coal falls dramatically by diversifying into metals that will be needed to electrify transport and electricity generation, such as copper, nickel and lithium.
The G20 countries agreed to end public financing for international “unabated” coal power plants in Rome last weekend, but stopped short of making any domestic commitments.
Research published on Thursday shows coal emissions have bounced back in 2021, rising an estimated 5.7 per cent above 2020 levels, after the drop in emissions last year because of the pandemic. That pushed total global emissions from energy in 2021 up 4.9 per cent compared with 2020.
India’s coal consumption grew 15 per cent this year, while China’s rose 2.5 per cent, according to research from the scientific journal Earth System Science Data.
“The rebound almost takes us back to 2019 levels,” said Glen Peters, research director at Cicero, and one of the authors of the emissions study. “Unless there is a drop in coal use, we will probably see emissions go up in 2022 and 2023.”
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