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Leaders Dec 3rd 2020 edition

Killing coal

Time to make coal history

Coal is at the toxic heart of the fossil-fuel economy

Dec 3rd 2020

 ec 3 d 0 0

A round the world the mood is shifting. Xi Jinping has adopted a target to cut
China’s net carbon emissions to zero by 2060. Under Joe Biden, America will

rejoin the Paris agreement, which it adopted ve years ago. In the nancial markets
clean-energy rms are all the rage. This month Tesla will join the s&p 500 share
index—as one of its largest members.

Remarkably, in a realm where words are cheap, there has been action, too. In
America and Europe the consumption of coal, the largest source of greenhouse
gases, has fallen by 34% since 2009. The International Energy Agency, an
intergovernmental body, reckons that global use will never surpass its pre-covid
peak.

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Yet coal still accounts for around 27% of the raw energy used to power everything
from cars to electric grids. Unlike natural gas and oil, it is concentrated carbon, and
thus it accounts for a staggering 39% of annual emissions of CO² from fossil fuels
(see Brie ng). If global emissions are to fall far enough, fast enough, the task now is
to double down on the West’s success and repeat it in Asia. It will not be easy.

Coal came of age in the Industrial Revolution. In the rich world its use in furnaces
and boilers peaked in the 1930s and faded as cleaner fuels became available.
Consumption in the West has recently collapsed. In Britain the last coal- red power
plants could close as soon as 2022. Peabody Energy, a big American coal miner, has
warned that it may go bankrupt for the second time in ve years.

Although carbon prices accelerated the shift in Europe, the Trump administration
has favoured America’s coal industry with deregulation and political support—and
still it has declined. One reason is competition from cheap natural gas produced in
America by fracking. Tax credits and subsidies have prompted renewables to scale
up, which has in turn helped drive down their costs. Solar farms and onshore wind
are now the cheapest source of new electricity for at least two-thirds of the world’s
population, says Bloombergnef, a data group. As coal faces cleaner rivals and the
prospect of more regulation, banks and investors are turning away, raising coal’s
cost of capital.

This is a victory, but only a partial one. In the past decade, as Europe has turned
against coal, consumption in Asia has grown by a quarter. The continent now
accounts for 77% of all coal use. China alone burns more than two-thirds of that,
followed by India. Coal dominates in some medium-sized, fast-growing economies,
including Indonesia and Vietnam.

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If the aim is to limit global temperature rises to 2°C above pre-industrial levels, it is
no good waiting for Asia’s appetite for coal to fade. New plants are still being built.
Many completed ones are not yet fully utilised and still have decades of life in
them. Nor is it enough to expect a solution from “clean coal” technologies, which
aim to capture and store emissions as they are released. They may help deal with
pollution from industrial uses, such as steelmaking, but they are too expensive for
power generation.

Hence Asia needs new policies to kick its coal habit, and soon. The goal should be to
stop new coal- red power plants being built and to retire existing ones. Some
countries have taken a rst step, by imposing new targets and bans. The Philippines
has declared a moratorium on new plants; Japan and Bangladesh are slowing
construction, too. China’s new ve-year-plan, which will be published next year,
may limit coal use. It should set its cap at current levels, so that the decline can start
immediately.

If targets are to be credible, Asian countries must tackle deeper problems. The
strategy that worked in Europe and America will get them only so far, because the
mining rms, power stations, equipment-makers and the banks that nance them
are often state-controlled. Market forces and carbon taxes, which use price signals
to change incentives, are therefore less e ective. And coal politics is treacherous.
The coal economy forms a nexus of employment, debt, tax revenues and exports.
China has used its Belt and Road Initiative to sell both mining machinery and
power plants. Across the region, local governments depend on coal for revenues.
Many will defend it ferociously.

One step in ghting regional lobbies is to redesign power systems so that

renewables can compete fairly and incentives work. Most renewables provide only
intermittent power, because the weather is changeable. National smart grids can
mitigate this by connecting di erent regions. Too many of Asia’s electricity systems

mu e market signals because they are locked into legacy long-term supply
contracts with coal rms, and because they are riddled with opaque subsidies and
price caps. Removing these so that markets and taxes work better will let renewable
power undercut coal.

The other step is to compensate losers. The lesson from destitute mining towns in
south Wales and West Virginia is that job losses store up political tensions. Coal
India, the national mining colossus, has 270,000 workers. From Shanxi province in
China to Jharkhand in India, local governments will need scal transfers to help
rebalance their economies. Banks may need to be recapitalised: China’s state
lenders may have up to $1trn at stake.

Europe and America have shown that King Coal can be dethroned, but they cannot
be bystanders as Asia works to complete the revolution. Coal powered the West’s
development. In 2019 coal consumption per person in India was less than half that
in America. It is in Asia’s long-term interests to topple coal, but the short-term
political and economic costs are large enough that action may be too slow. If
politicians in Europe and America are serious about ghting global warming, they
must work harder to depress coal elsewhere. That includes honouring prior
promises to help developing countries deal with climate change.

Ultimately, though, the responsibility will lie with Asia itself. And the good news is
that it is overwhelmingly in Asia’s interest to do so. Its people, infrastructure and
agriculture are dangerously exposed to the droughts, ooding, storms and rising
sea levels caused by climate change. A growing middle class yearns for their
governments to clean up Asia’s choking metropolises. And renewable energy o ers
a path to cheaper power, generated at home, as well as a source of industrial
employment and innovation. Coal’s days are numbered. The sooner it is consigned
to museums and history books, the better. 7

For more coverage of climate change, register for The Climate Issue, our fortnightly
newsletter, or visit our climate-change hub

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This article appeared in the Leaders section of the print edition under the headline "Make coal history"

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