The Battle for Coal at COP26

On November 4, 2021, 45 countries and the European Union pledged to “accelerate a transition away from unabated coal power generation.” The statement is broad, more of a declaration than a firm commitment. Several countries signed on with reservations. The world’s six largest coal consumers—China, India, the United States, Russia, Japan, and South Africa—did not sign, although they consume 80 percent of the world’s coal. Yet the pledge is noticeable because it sketches the broad outlines for the coal agenda out of the 26th UN Climate Change Conference of Parties (COP26) in Glasgow, a conference that ended with a high-profile disagreement on whether to call for a “phase out” of coal or a “phase down.” As such, it deserves a deeper parsing.

Blueprint for Phasing Out Coal

The first three clauses of the declaration capture different elements of the coal phaseout challenge. The first is a call to “rapidly scale up . . . deployment of clean power generation and energy efficiency measures.” The second clause sets target dates: major economies should phase out coal in the 2030s, everyone else in the 2040s. And the third clause aims to halt construction of new unabated coal-fired power plants, to stop the issuance of permits for such facilities, and to cease “new direct government support for unabated international coal-fired power generation.” This is the trifecta of phasing out coal.

Some of the countries that signed the agreement have existing plans and strategies to phase out coal. Some countries do not use coal at all. But there were several pleasant surprises on that list. Indonesia signed on, although it refrained from endorsing the clause on new construction without additional help. Vietnam and the Philippines signed on, as did Botswana (excluding the clause on new construction) and Morocco (excluding the clause that sets a firm timeline for closure). Among advanced economies some noticeable presences were South Korea, Chile, Israel, Ukraine, and Poland.

These three pillars represent distinct challenges, however. A decision to stop building new projects is the easiest one, especially for projects located overseas. The declining cost of renewable energy makes this choice easier. Even in Southeast Asia, one of the last growth markets for coal, the rise of wind and solar is visible in several of the region’s major economies. The G20 leaders in Rome agreed to “put an end to the provision of international public finance for new unabated coal power generation abroad by the end of 2021.” China itself announced in September 2021 that it would stop supporting coal plants overseas (although it was mum on domestic coal projects). The coal pipeline is shrinking. The battle for the next facility is being (slowly) won.

Shutting down existing coal plants is an altogether different task. In the West, declining coal-fired generation has been enabled by several forces: stagnant or low-growth electricity demand; a fleet of old plants that are paid off, use outdated technology, and are costly to operate; higher emissions standards and, in some cases, carbon prices that squeeze coal generation; and increasing competition from other generation sources like natural gas, solar, and wind. Even in this environment, the decline of coal has been dramatic but rarely entirely complete—very few countries have gotten to zero. It often takes years to squeeze the last part out of the system—either because it requires political will to force closures, or because these facilities can be useful for system reliability reasons.

In emerging economies, the market context is entirely different. Electricity demand is typically rising. Even if coal is more expensive to operate than competing sources, and even if it is cheaper to build a new wind farm or solar array than it is to run an existing coal plant, it is hard to shut down coal facilities because few countries have sufficient spare capacity in their electricity systems to be able to do so. And this equation becomes immensely more complicated when considering the broader coal ecosystem—the jobs in mining, transportation, and generation.

This is the context in which to think about various coal-related initiatives at COP26. Michael Bloomberg announced an initiative to shut down a quarter of the world’s existing coal plants and to stop all new construction. The Asian Development Bank launched a new mechanism “that seeks to retire existing coal-fired power plants on an accelerated schedule and replace them with clean power capacity.” The partnership announced between South Africa and a number of Western governments follows in the same vein, although it is broader, mobilizing capital for new energy sources as well as phasing out existing facilities. The Accelerating Coal Transition program launched by the Climate Investment Funds is premised on a similar idea. These initiatives grapple with different dimensions: existing versus new capacity, scaling up alternatives versus putting pressure on existing ones. But the common line remains: in emerging economies, scaling up renewables will not be enough to shut down coal. It will be just as important to provide incentives or to increase the pressure, through regulatory means and otherwise, on existing facilities to shut down.

A final point is important to make. This was a declaration about phasing out coal from electricity generation. Around a third of the world’s coal is consumed outside of power, mostly in industry. A reduction in coal use in line with the Paris Agreement requires that coal emissions are eliminated not just from power generation but from industry too. This is why some related agreements at COP26 are so important, such as the first movers coalition for the private sector to increase its commitment to scale up clean energy, as well as the agreement between the United States and the European Union to negotiate a trade deal for climate-aligned steel and aluminum.

A Just Transition

The fourth clause of the declaration is the least controversial. It calls for a just transition for workers and communities affected by coal phaseouts. (In fact, the representative for Kazakhstan only endorsed this clause, putting the country in the paradoxical position of pushing for the justness of a transition that it is not willing to undertake or accelerate.) But uncontroversial does not mean simple. There are several tension points that can be expected.

The first tension is over timing. A just transition takes time, planning, and resources. It is not something that happens overnight. Emissions, by contrast, must fall fast. Therein lies a problem: How can the climate objective of reducing emissions quickly be squared with the political imperative of transitioning workers and communities, a task that is slow and takes time? Take enough time to look after workers and a country risks being in Germany’s position, where the coal phaseout is drawn out, likely far beyond what markets would justify. Move too quickly, by contrast, and one falls in the trap of United States, where coal is gone and nothing has emerged to replace it.

The question of timing is complicated by a second tension: it is hard for politicians to shut down an industry that appears healthy and robust. The political conversation around a just transition is easier when decline is visible. Even then, political incentives can distort the discourse: it is easier to blame outsiders for wanting to shut down coal (or oil and gas) than it is to face the reality that an industry must evolve over time. This is a problem leaders do not know how to escape yet—by the time decline is obvious to everyone, it is too late to execute a just transition.

The third tension is between aspiration and reality. It is easy to sketch out, in broad terms, what a just transition might look like, to imagine a formerly coal-reliant community evolving to host a number of other industries, able to sustain its former population levels and living standards. But in practice, this is very hard work with very few successful examples to emulate. It is thus common to fall back on the familiar calls for “equity” or “finance” or “good jobs,” to speak in generalities rather than specifics. This is a pity. The world needs to ground this conversation quickly.

What Comes Next

These are the main fronts in the battle for coal-fired power generation (the battle for coal use in industry is another matter altogether). Looking forward, it is important to focus on two major themes. First, there is no single formula for phasing out coal. Stopping new projects from being built is the lowest common denominator, but it is not enough given how much coal exists in the system. Alternatives to coal must be scaled up, but in several markets, this will not suffice. Squeezing existing coal facilities can be important in some countries, but no country will jeopardize its security of supply and remove critical capacity from its system. Even the term “phase out” can be a misnomer. A rapidly shrinking coal sector is still a win for the climate, even if, for reliability reasons, coal retains a small share in a system. Zero is the goal, but even a small number is success.

The other theme is around the quest for a just transition. This is no doubt the overarching task of our times. But executing a just transition will often be at odds with the pressure to shut down coal fast. It is crucial to scale up global efforts on this front: to do detailed work, to map ecosystems and stakeholders, to create interventions that can react quickly. The time needed to plan and carry out a just transition cannot be an excuse to keep burning coal indefinitely; but, similarly, leaders and policymakers cannot be so single-minded in their effort to shut down coal that they forget the workers and communities that now live off coal. This is the biggest and most important fault line on the battle for coal.

Nikos Tsafos is the James R. Schlesinger Chair for Energy and Geopolitics with the Energy Security and Climate Change Program at the Center for Strategic and International Studies in Washington, D.C.

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