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Coal-fired power generation to hit all-time high in 2021 amid climate pledges: IEA

17 December 2021 Max Tingyao Lin

Global coal demand is on track to exceed pre-pandemic levels this year and could reach an all-time high in 2022, putting global efforts to counter climate change in jeopardy, the International Energy Agency (IEA) said in its annual report for the most carbon-intensive fossil fuel.

This year has seen a strong rebound in coal consumption driven by record electricity generation using the fuel, even as many governments are promising to phase out coal from their power mix.

"Coal is the single largest source of global carbon emissions, and this year's historically high level of coal power generation is a worrying sign of how far off track the world is in its efforts to put emissions into decline towards net zero," IEA Executive Director Fatih Birol said 17 December.

Birol added that "30% of the entire global CO2 emissions come from coal electricity generation."

For the world to reach net-zero emissions by 2050 and avoid climate disasters, the IEA estimates that coal usage needs to fall by 24% in 2020-2030 before a further decrease of 73.7% in the following 20 years.

The world's coal consumption will instead grow by 6% to reach nearly 7.91 billion metric tons (mt) this year, before increasing to 8.03 billion mt in 2022, according to the IEA's Coal 2021 report. This compares with the previous record of 8 billion mt in 2013.

"The report is a sobering reality check," Birol said.

China's coal consumption, which accounts for more than half the global total, is expected to increase by 4% to 4.13 billion mt in 2021. India, the world's second largest consumer, is forecast to register a 13.4% increase to 1.06 billion mt.

The IEA also expects coal usage to rise by 74 million mt in the US and 45 million mt in the EU.

Strong electricity demand

Coal usage decreased to 7.46 billion mt last year from 7.8 billion mt in 2019, mainly due to the COVID-19 pandemic. But the Paris-based watchdog said the fall was not as steep as initially expected, with the resumption of business activities across the globe driving up electricity sector usage in the latter part of the year.

This momentum has continued well into this year, and the IEA expects global coal-fired power generation to grow by 9% in 2021 to a record 10,350 TWh, compared with a previous all-time high of 10,200 TWh in 2018.

Consequently, demand for thermal coal and lignite—mainly used to generate electricity—is forecast to rise from 6.36 billion mt in 2020 to 6.8 billion mt this year.

"The declines in global coal-fired power generation in 2019 and 2020 led to expectations that it might have peaked in 2018. But 2021 dashed those hopes," said the IEA report, adding that other energy suppliers have underperformed.

"Renewable power generation is lower than expected due to meagre rainfall and weak wind in some regions," according to the report, and a natural gas "supply shortage and resulting record-high gas prices supported a rebound in coal-based power generation, especially in the US and the EU."

The return of coal power this year came as 46 countries pledged to phase out coal from their electricity mix in the Global Coal to Clean Power Transition Statement during COP26. Developed country signatories have until 2040 and other countries have until 2050 to do so.

In the UN climate summit's closing statement, delegates from at least 193 countries agreed to phase down the use of unabated coal power without setting a timeline. The draft statement had used the phrase "phase out" before a last-minute intervention from the Indian delegation.

"It is disappointing that coal power may hit an all-time high in the same year that countries agreed to phase it down," thinktank Ember's Global Programme Lead Dave Jones tweeted. "It will take time for the ship to turn, but time is not on our side."

Worrying outlook

Looking forward, the IEA anticipates global coal demand will increase by 125 million mt between 2021 and 2024, mainly due to rising electricity demand in Asia.

Annual coal consumption is expected to rise by 135 million mt in China, 129 million mt in India, and 50 million mt in Southeast Asia during the period. But it is forecast to drop by 77 million mt in the US and 101 million mt in the EU, as the regions use more gas and generate additional renewable power.

The IEA estimates coal-fired generation will increase by 4.1% in China, 11% in India, and 12% in Southeast Asia in 2021-2024, while a decline of 21% is expected in the US, and 30% in the EU.

If the predictions materialize, CO2 emissions from coal in 2024 would be well over 3 billion mt higher than what is required on the trajectory to a net-zero world by 2050, according to the IEA.

Keisuke Sadamori, director of energy markets and security at the IEA, said many governments' climate pledges are not yet reflected in the near-term forecast due to "the major gap between ambitions and action."

"Asia dominates the global coal market, with China and India accounting for two-thirds of overall demand. These two economies—dependent on coal and with a combined population of almost 3 billion people—hold the key to future coal demand," Sadamori said.

To cap global warming at 1.5 degrees Celsius as the Paris Agreements suggests is necessary, the IEA said all unabated coal power plants in the world need to be closed by 2040, and that none of them should receive new investment from now on.

"Without strong and immediate actions by governments to tackle coal emissions—in a way that is fair, affordable and secure for those affected—we will have little chance, if any at all, of limiting global warming to 1.5 degrees," Birol said 17 December.

Government intervention

According to UN estimates, at least 30 countries have pledged to not build new coal-fired power plants in efforts to meet their climate goals.

China, South Korea, and the G7 nations have also promised to stop providing government finance for overseas coal power projects.

Observers said those commitments will only start to affect actual coal-fired generation several years down the line, as they are not expected to cover the plants already under construction or pre-construction projects tied to firm financing.

Banks usually begin financing a coal project two or three years before its scheduled start date, according to IHS Markit Executive Director for Climate and Cleantech Peter Gardett.

"Anything you see today will really start to be felt in the coal sector in the middle of the decade," he said.

Separately, central banks are also ramping up efforts to assess the climate risks of their operations and the financial systems they oversee.

This means that, in the future, they might only deal with financial instruments meeting climate standards in their market activities, Gardett said. Central banks could also ask their compatriot banks to limit the climate risks in their portfolios, but any direct ban on coal financing in the near future is unlikely, he added.

"They're going to take a harder line on climate stuff, but that doesn't mean that they will come out and say you cannot finance [coal] anymore … That would add risk to the [overall] equation rather than reduce it," Gardett said.

Kelly Shields, senior officer for banking standards at nonprofit ShareAction, said other social forces should step up if governments fail to use regulatory tools to control coal financing.

"There will always be a place for investors and civil society to hold financers to account. This is especially true in the current climate, where government regulation is lacking," Shields said.

Posted 17 December 2021 by Max Tingyao Lin, Principal Journalist, Climate and Sustainability


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