News | Climate Crisis

Will Ukraine war revitalise coal

– world’s dirtiest fossil fuel?
Coal demand began surging in 2021 as gas
prices rose, an effect intensified by the
Russian invasion of Ukraine, threatening
the EU’s legally binding 2030 climate
target.

To adapt to Europe's energy crisis, coal appears an

obvious short-term choice given a lack of existing liquid
natural gas infrastructure [File: Sascha Steinbach/EPA-
EFE]

By Ruairi Casey
25 Mar 2022

The president of last year’s COP26 may

have called for it to be “consigned to his-
tory” but demand for little-loved coal,
the world’s dirtiest fossil fuel, has surged
in recent weeks.

Russia’s invasion of Ukraine and the un-

precedented economic sanctions that
have followed have thrown the global
energy market into chaos, sending fossil
fuel prices soaring and raising questions
in many countries about whether cli-
mate ambitions need to be softened in
order to keep the lights on.

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US, EU announce plan to reduce European

reliance on Russian gas

Though Western sanctions have not yet

directly targeted Russian oil, coal or gas,
the European Union has announced
plans to end its energy reliance on Rus-
sia, while companies across the globe,
wary of reputational and financial risks
now associated with the country, look to
suppliers elsewhere.

German Chancellor Olaf Scholz rebuffed

calls from some EU states to widen
sanctions and embargo all Russian ener-
gy, telling the Bundestag on Wednesday
that such measures would have the ef-
fect of “plunging our country and all of
Europe into a recession”.

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However, the EU is already diversifying

its sources for fossil fuels, he said. Eu-
rope is particularly reliant on energy im-
ported from Russia, from where it
sources 45 percent of its coal, 40 percent
of gas, and 25 percent of its oil.

The 27-state bloc has pledged to reduce

its greenhouse gas emissions by 55 per-
cent by 2030, based on 1990 levels, and
achieve net-zero emissions by 2050.

To adapt to the continent’s energy crisis,

coal appears an obvious short-term
choice given a lack of existing liquid nat-
ural gas infrastructure. France has tem-
porarily allowed power plants to burn
more coal, Italy has raised the possibility
of reviving decommissioned coal plants,
and Germany has announced plans to
build its coal reserves and signalled its
coal phase-out date may have to be de-
layed.

“This is a bit of a stress test to the way

countries have been managing energy
transition,” said Pieter de Pous, climate
and energy policy adviser at climate
change think-tank E3G.
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“Countries that were doing this proper-

ly, avoiding gas as a bridge fuel option,
are in a better situation than those who
really were betting on gas to get out of
coal.”

Why plans to buy Asia's coa…

Dizzying price increase

Russia is the world’s third-largest sup-

plier of thermal coal, used mainly for
power generation. Other leading pro-
ducers, including Australia and South
Africa, are already experiencing in-
creased demand from both the Asian
and European markets, far outstripping
available supply.
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The price of coal futures at Australia’s

Newcastle port, a key benchmark for the
Asian market, the world’s largest, stood
at $325 per tonne on Wednesday, below
the peak of $441 seen earlier this month,
but still more than double where it stood
at the beginning of the year.

Meanwhile, shares in major coal miners

such as Glencore, Sasol, and Peabody
Energy have almost doubled since Jan-
uary.

Coal demand was already increasing

through 2021 as gas prices rose, an ef-
fect intensified by the Ukraine conflict.

A briefing note from BloombergNEF

named several factors driving coal’s
dizzying price increase. On the demand
side, Europe’s whetted appetite comes
just as coal consumption is growing in
Asia, as economies rebound from the
pandemic.

It also highlighted several supply con-

strictions in coal-producing countries:
not only the threat of sanctions on Russ-
ian coal, but floods in mining regions in
Australia, export restrictions in Indone-
sia to address domestic shortages, and a
series of mining accidents in China.

“There is simply an almost complete ab-

sence of surplus thermal coal available
globally,” said Steve Hulton, vice presi-
dent of coal at Rystad Energy, earlier
this month.

‘Climate Faustian bargain’

While coal’s unexpected surge in popu-

larity will reap major profits for busi-
nesses still active in the sector, it is un-
likely to reverse the long-term costliness
and undesirability of coal in the United
States and the EU, analysts told Al
Jazeera.

“There may be some cases in which Eu-

ropean countries are forced into a short-
term climate Faustian bargain, tem-
porarily increasing coal use as a measure
of last resort in return for a faster phase-
out of fossil gas, and especially Russian
fossil gas,” said Tim Gore, head of the
Low Carbon and Circular Economy pro-
gramme at the Institute for European
Environmental Policy (IEEP).

“But such measures can only be short-

lived if the EU is to meet its legally bind-
ing 2030 climate target.”

The crisis has revealed the dangers of

relying on gas as a transition fuel, and
shown a rapid expansion of renewables
and improvements to energy efficiency
are the best route to hitting the EU’s
net-zero goals, added Gore.

The situation is somewhat different in

Asia, which is far more reliant on coal
for energy production.

While the International Energy Agency

predicts a sharp decline in coal-fired
generation in Europe and the US be-
tween 2021 and 2024 as the share of re-
newables increases, it is expected to rise
by 12 percent in Southeast Asia, 11 per-
cent in India, and 4.1 percent in China
over the same period.

Concerned by global energy shortages

and the possibility of an economic
slump, China has approved new coal
mines and increased coal output by 10
percent in the first two months of this
year when compared with the same peri-
od in 2021.

India, the world’s second-largest coal

consumer, has also planned to ramp up
domestic production to cut its reliance
on imports. The state-run Coal India has
set a target of 670 million tonnes for this
fiscal year.

However, the long-term prospects of

coal-generated energy remain dim. Not
only do coal plant operators face spiking
input costs, but options for financing are
quickly dwindling.

State and institutional backers are shed-

ding coal to ensure greener portfolios
and hit net-zero targets, meaning the
cost of borrowing to fund new machin-
ery or infrastructure at coal mines and
plants has risen considerably over the
past decade, just as the cost for funding
renewables has decreased.

In the US, 80 percent of coal plants ei-

ther cost more to operate than replacing
them with wind or solar plants, or are
scheduled for closure, one study found.

“Renewables are still the cheaper source

of new capacity in most countries …
those fundamental dynamics haven’t
changed,” de Pous told Al Jazeera. “They
will continue to mean that’s where the
direction of travel is going.”

Germany: The Coal War | Pe…

SOURCE: AL JAZEERA

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