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COP26 sees more coal phase-out pledges amid volatile Asian prices

04 November 2021 Cristina Brooks

Two new UK-led initiatives seeking to stem rising emissions from coal power plants have secured new members in Asia, but do not have the cooperation of all the key players.

A campaign called Global Coal to Clean Power Transition Statement and a partnership backing the International Just Transition Declaration were announced at COP26 this week and mentioned in UK Business and Energy Secretary Kwasi Kwarteng's 4 November speech.

"I do believe as we're getting to a point where we consign coal power to history, a brighter future comes ever closer, a future of cleaner air, cheaper power, and good green jobs," Kwarteng said in the speech.

The UK-led Global Coal to Clean Power Transition Statement sees 46 countries commit to phase out coal power. Developed country signatories have until 2040 and other countries have until 2050 to do so. They must also stop investing in new coal power generation domestically and internationally while scaling up investment in what the UK calls "clean power." The UK in a statement said major banks had committed to end financing coal, "effectively ending all public financing of new unabated coal power."

While a complete list of the 77 signatories has not yet been published, major coal power users China, India, and Australia are not expected to be on it.

The UK said that it included 23 countries that are making commitments on ending coal for the first time as well as 31 non-country organizations. New commitments came from Vietnam, Chile, and Poland, which relies upon a heavily coal-dependent power mix.

Poland in September was penalized for mining for coal by Europe's top court, the Luxembourg-based Court of Justice of the European Union (CJEU). Poland would be affected by higher carbon prices proposed under the EU's Fit for 55 net-zero policy.

Meanwhile, Juan Pablo Osornio, head of Greenpeace's delegation at COP26 told Sky News that the statement lets countries pick their own phase-out dates and is not ambitious enough.

Executive Director of the International Energy Agency (IEA) Fatih Birol did not seem impressed with the way the commitments approached existing power plants in the run up to 2050. "For me, the blind spot of the coal debate is what are we going to do with existing stock. According to the numbers of the IEA, if the coal plants we have now continue to run in line with normal economic lifetimes, they will eat up half the budget we have to reach 1.5 degree Celsius target," he said.

China, India, Australia nix pledge

UK Shadow business secretary Ed Miliband also criticized the UK government for failing to secure pledges from large coal users like China, which accounts for 50% of the world's coal consumption, according to Worldometer. "Rather than driving the ambition we need, as COP president it has let others off the hook," said Miliband.

However, UK Premier Boris Johnson has said that China has, independent of this new pledge, set a course for reduction in coal use. Its 2060 net-zero target puts it on track to reduce coal's share of power generation to just 7% by that date, IHS Markit analysts found.

India likewise pledged to achieve net-zero emissions by 2070 on 1 November. However, its power demand is set to grow rapidly, leading IHS Markit to predict it will likely to remain coal-dependent through 2060.

China was in September facing rolling powre cuts as a result of fuel shortages and skyrocketing coal prices, according to IHS Markit. Thermal coal prices in China later fell in the wake of Beijing's interventions in October.

However, China, Japan, and Korea — accounting for more than 95% of total coal power foreign financing — had earlier in the year agreed to stop financing coal power beyond their borders.

Australia is the largest exporter of coal to Asian countries, and most of its exports are to Japan (43%), followed by South Korea (16%), Taiwan (13%), India (7%), and China (3%).

It is not expected to sign the statement. "Australia is so out of step and out of touch with the rest of the world, and that's going to harm our economy, climate, and future prosperity," said climate change expert and Australian National University researcher, Will Steffen.

Asian coal prices

The same day, the UK promised $270 million (£200 million) for the transition away from coal for South Africa, Indonesia, and the Philippines.

It pledged the funds through its participation in a multibillion-dollar pilot program, the Accelerating Coal Transitions (ACT). The US, Canada, and Germany are also contributing to the ACT, in which governments, developing countries, and private financiers will look into obstacles to coal transitions.

The program was announced in March by participants in a multilateral development mechanism, the Climate Investment Funds.

The aid comes after several other COP26 developments related to Asian coal power: Japan also committed $25 million to the Manila-based development bank ADB's Energy Transition Mechanism (ETM) to help retire 30 GW of coal power in Indonesia, the Philippines, and Vietnam.

The transition comes at a time when countries are concerned about coal. In some countries in South and Southeast Asia, the drop in power demand in the pandemic led to a rise in energy costs related to coal. The Asian benchmark price of Australian thermal coal has grown more than 150% since April, according to IHS Markit coal analysts.

Indonesian coal prices have risen 439% since a 2020 low, and the country has for several months been considering coal phase-outs that would depend on international aid. "It is unlikely that countries will continue a coal-reliant path after the pandemic now that a long-existent structural challenge — coal power's inability to adjust to volatile demand — has been exposed," said the World Resources Institute.

It could join countries that include the UK, Canada, Germany, Italy, and Spain that have already committed to phase out coal-fired power stations.

South Africa gets just transition from coal

On 2 November, France, Germany, and the US also agreed to help South Africa finance its shift away from coal power and towards investments "including electric vehicles and green hydrogen."

They will help South Africa reach its Paris Agreement commitments with an initial $8.5 billion in grants, concessional loans and investments.

South Africa is currently heavily dependent on coal, with a fleet of old and inefficient coal-fired power plants near retirement age, and also relies on liquid fuels created from coal.

It has estimated that it would need $513 billion for electric and $488 billion for hybrid electric vehicles through 2050 and 2030, respectively.

It also needs 23Mt of CO2 Carbon Capture and Storage worth $0.45 billion to green its liquid fuel production from coal as well as $3 billion to expand a Renewable Energy Independent Power Producer Procurement Programme (REI4P) that has approved at least 79 renewable energy IPP projects.

Powering Past Coal Alliance

The UK government also praised the efforts of its existing group, the Powering Past Coal Alliance (PPCA), launched with Canada at COP23 in 2017.

The alliance includes 48 nations and territories that have been urged to phase out coal by 2050 with financiers that share a similar aim for their portfolios of financing only unabated coal.

At a COP26 event it hosted, the alliance announced 28 new members including Slovenia and Estonia. However, China, India, and Australia remain conspicuous in their absence from the membership list on its website.

Special Adviser to the Secretary-General on Climate Action Selwin Charles Hart said in a speech the PPCA has "done a great job so far," but that multinational development banks had underdelivered on climate action and current NDCs put the world on course for a catastrophic 2.7 degree Celsius temperature rise.

Posted 04 November 2021 by Cristina Brooks, Senior Journalist, Climate and Sustainability

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