Coal is set to roar back, and so are its climate risks

For 150 years, more and more of its sooty deposits have been extracted from under the ground, first to power the economies of Europe and North America, then Asia and Africa. Today, coal is still the largest source of electricity, although its share is steadily shrinking as other sources of power come online, from nuclear to wind.

Global spending on coal projects dropped to its lowest level in a decade in 2019. And, over the past 20 years, more coal-fired power plants have been retired or shelved than commissioned. The big holdouts are China, India and parts of Southeast Asia, but, even there, coal’s once-swift growth is nowhere as swift as it was just a few years ago, according to a recent analysis.

In some countries where new coal-fired power plants were only recently being built by the gigawatts, plans for new ones have been shelved, as in South Africa, or reconsidered, as in Bangladesh, or facing funding troubles, as in Vietnam. In some countries, including India, existing coal plants are running way below capacity and losing money. In others, including the United States, they are being decommissioned faster than ever.

Nonetheless, demand is still strong. “Coal is not dead,” said Melissa Lott, research director for the Center for Global Energy Research at Columbia University. “We have made a lot of progress, but we have not made that curve.”

Coal is the lightning rod of climate diplomacy this year, as countries scramble to rebuild their economies after the coronavirus pandemic while, at the same time, stave off the risks of a warming planet. The Biden administration has leaned on its allies Japan and Korea to stop financing coal use abroad. And it has repeatedly called out China for its soaring coal use. China is by far the largest consumer of coal and is still building coal-fired power plants at home and abroad.

Chinese President Xi Jinping took a swipe at that criticism Monday by pointing to the historical responsibility of Western industrialized nations to do more to slow down warming. The United States accounts for the largest share of emissions in history; China accounts for the largest share of emissions today.

“The principle of common but differentiated responsibilities must be upheld,” Xi said at his own global summit in the city of Boao.

‘Growing Opposition Against Coal’

Since the start of the industrial era, coal has been the main fuel to light up homes, power factories and, in some places, to cook and heat rooms, too. For more than a century, Europe and the United States consumed most of the world’s coal. Today, China and India account for two-thirds of coal consumption.

Other energy sources have joined the mix as electricity demand has soared: nuclear, wind and, most recently, hydrogen. Coal made room for new entrants but refused to retreat.

Today, several forces are rising against coal. People are clamoring against deadly levels of air pollution, caused by its combustion. Wind and solar energy, once far costlier than coal, are becoming competitive, while some countries are facing a glut of coal-fired plants already built.

So, even in countries where coal use is growing, the pace of growth is slowing.

In South Africa, after years of lawsuits, plans to build a coal-fired power station in Limpopo Province were canceled in November.

In at least three countries, Chinese-funded projects are in trouble or dead. In Kenya, a proposed coal plant has languished for years because of litigation. In Egypt, a planned coal plant is indefinitely postponed. In Bangladesh, Chinese-backed projects are among 15 planned coal plants that the government in Dhaka is reviewing, with an eye to canceling them altogether.

Pakistan, saddled by debts, announced a vague moratorium on new coal projects. Vietnam, which is still expanding its coal fleet, scaled back plans for new plants. The Philippines, under pressure from citizens groups, hit the pause button on new projects.

“Broadly speaking, there’s growing opposition against coal and a lot more scrutiny right now,” said Daine Loh, a Southeast Asia power sector energy specialist at Fitch Solutions, an industry analysis firm. “It’s a trend—moving away from coal. It’s very gradual.”

Money is part of the problem. Development banks are shying away from coal. Japan and Korea, two major financiers of coal, have tightened restrictions on new coal projects. Japan is still building coal plants at home, rare among industrialized countries, although Prime Minister Yoshihide Suga said in October that his country would aspire to draw down its emissions to net-zero by 2050.

There are some big exceptions. Indonesia and Australia continue to mine their abundant coal deposits.

Perhaps most oddly, Britain, which is hosting the next international climate talks, is opening a new coal mine.
And then there are the world’s biggest coal consumers, China and India.

China’s economy rebounded in 2020. Government stimulus measures encouraged the production of steel, cement and other industrial products that eat up energy. Coal demand rose. The capacity of China’s fleet of coal-fired power plants grew by a whopping 38 gigawatts in 2020, making up the vast majority of new coal projects worldwide and offsetting nearly the same amount of coal capacity that was retired worldwide. (One gigawatt is enough to power a medium-sized city.)

Coal’s future in China is at the center of a robust debate in the country, with prominent policy advisers pressing for a near-moratorium on new coal plants and state-owned companies insisting that China needs to burn more coal for years to come.

India’s coal fleet is growing as well, bankrolled by state-owned lenders. There is not much of a signal from the government that it wants to reduce its reliance on coal, even as it seeks to expand solar energy. The government in New Delhi is allowing some of its oldest, most-polluting coal plants to remain open, and it is seeking private investors to mine coal. If India’s economy recovers this year, its coal demand is set to rise by 9%, according to the IEA.

But even India’s coal fleet isn’t growing as fast as it was just a few years ago. On paper, India plans to add about 60 gigawatts of coal power capacity by 2026, but given how many existing plants are operating at barely half capacity, it’s unclear how many new ones will ultimately be built. A handful of state politicians have publicly opposed new coal-fired power plants in their states.

How much more coal India needs to burn, said Ritu Mathur, an economist at The Energy and Resources Institute, or TERI, in New Delhi, depends on how fast its electricity demand grows — and it could grow very fast if India pushes electric vehicles. “To say we can do away with coal or that renewables can meet all our demand,” Mathur said, “is not the story.”

‘The Big Question Is Around Gas’

What has most quickly come to replace coal in many countries is that other fossil fuel: gas.

From Bangladesh to Ghana to El Salvador, billions of dollars, some from public coffers, are being poured into the development of pipelines, terminals and storage tanks, as the number of countries importing liquefied natural gas has doubled in less than four years. Gas now supplies nearly one-fourth of all energy worldwide.

Its proponents argue that gas, which is less polluting than coal, should be promoted in energy-hungry countries that cannot afford a rapid scale-up of renewable energy. Its critics say multibillion-dollar investments in gas projects risk becoming stranded assets, as coal-fired power plants already are in some countries; they add that methane emissions from the combustion of gas are incompatible with the Paris Agreement goal of slowing down climate change.

Gas supplies a growing share of electricity in the United States (35%) and Europe (20%).

The United States, buoyed by the fracking boom, is among the world’s top gas exporters, alongside Qatar, Australia and Russia.

American companies are building a gas import terminal and power station in Vietnam. Gas demand is growing sharply in Bangladesh, as the government looks to shift away from coal to meet its galloping energy needs. Ghana this year became the first country in sub-Saharan Africa to import liquefied natural gas. And the U.S. Agency for International Development has been promoting gas as a way to electrify homes and businesses across Africa.

And there’s the rub for the Biden administration: While it has set out to be a global climate leader, it has not yet explained its policy on advancing gas exports—particularly on the use of public funds to build gas infrastructure abroad.

“There’s fairly strong consensus around coal. The big question is around gas,” said Manish Bapna, acting president of the World Resources Institute. “The broader climate community is starting to think about what a gas transition looks like.”