Reports of coal’s terminal decline are premature
The rapid expansion of coal power in fast-growing emerging economies will in part cancel out the reduction of coal investments in China and India, says MCC study.
"The coal problem is by no means self-defeating, despite all the advances in renewable energy. If the international community wants to achieve its greenhouse gas emission reduction goals to avoid the greatest climate risks, then it must act decisively," says MCC Director Ottmar Edenhofer, who is also Chief Economist at PIK. "It would take a coal exit, worldwide. The best way to do this is, from an economic point of view, a substantial carbon pricing. It may look different from one country to another, but a coalition of pioneers should do the first step – this very decade. "
In 2016, China and India have each cancelled more than 50 percent of their plans to build new coal-fired power plants, according to the study. However, globally coal investments are further increasing. Turkey, Indonesia and Vietnam, for example, plan to increase their capacity altogether by about 160 gigawatts. This is about as much as the output of all existing coal-fired plants in the 28 EU countries.
In addition, other countries’ planned future investments in coal have been massively extended in 2016. Investment plans in Egypt, for example, have increased almost eightfold, while they have nearly doubled in Pakistan. These developments jeopardize countries’ ability to meet their Nationally Determined Contributions (NDCs), as CO2 emissions from coal-fired power plants would increase almost tenfold from 2012 to 2030 in Vietnam, for example, and almost quadruple in Turkey.
“It is true that China has recently invested less in coal and has perhaps even passed its peak in carbon emissions,” says Edenhofer. “This has rightly received a lot of attention – but to speak of the end of coal is premature. Recent data also show that China is increasingly investing in coal-fired power plants abroad.”
If current plans are implemented, emissions from coal would nearly exhaust the remaining global carbon budget, which is determined by the Paris Agreement’s target to limit global warming to less than two degrees Celsius. According to the International Panel on Climate Change (IPCC), if the world wants to likely stay below the two-degree threshold, it may only release another estimated 700 to 800 gigatons (Gt) of CO2 into the atmosphere.
However, the existing infrastructure including, for example, power plants and buildings, is expected to emit about 500 Gt already if used to the end of its lifecycle. The coal-fired power plants currently under construction and those additionally planned would amount to another 150 Gt. Under these circumstances, additional emission growth, for instance, resulting from growth within the transport sector or agriculture would then exceed the total budget. The newly published study is based on data of the US-based organization CoalSwarm and the International Energy Agency (IEA) as well as on subsequent research by the authors.
“Although the costs of renewables have recently fallen, they still can’t compete with cheap coal in many parts of the world,” says Jan Steckel, head of the MCC working group Climate and Development. “The financial costs for renewable energy in these countries are stagnating at a relatively high level. In order to incentivize investments in renewables, capital costs would have to be reduced by means of intelligent policies, such as the use of credit default swaps.”
The researchers advocate politically feasible solutions for a global coal exit. For example, coal could be pushed out of the energy markets by means of a roadmap to shut down coal mines, stricter power plant regulations and higher carbon prices worldwide. This could be combined with using the revenues from carbon pricing for a socially just transition of tax systems or the expansion of socially necessary infrastructure.