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Climate risk increasing due to rising coal use

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Climate change NGOs warn of heightened climate risk from the increased use of coal power in response to the energy crisis.

  • Almost half the 1,000 companies tracked by Urgewald’s Global Coal Exit List (GCEL) are developing new coal assets, while only 27 have announced exits.
  • Higher gas prices due to the Russia-Ukraine war have made coal a cheaper alternative for many countries.
  • The inability to reverse coal consumption from the largest carbon emitting countries jeopardises global net-zero goals by 2050.

Rising coal mining output and new coal-fired power plants in some of the heaviest polluting countries, and largest economies, raises concern for not just their own emission reduction goals, but also for global decarbonisation.

While policy missteps and geopolitical events are being used to justify the ongoing use of coal power, putting pressure on the financial industry to stop funding coal is a necessary part of reducing emissions and mitigating climate risk.

Worst polluters not changing course spells trouble for the rest

Coal usage remains at high levels, or is forecast to increase, in some of the heaviest polluting countries, which also happen to have some of the largest economies in the world.

The IEA forecasts Chinese coal consumption to remain flat in 2022, in its latest coal market update, after a 3% decline in the first half, while global demand was expected to rise by almost 1%.

To put this in perspective, China is the largest consumer of coal in the world, and is also the heaviest polluter, generating 30% of global carbon emissions, as it accounts for over half of the global coal generating capacity.

While slowing economic growth may reduce electricity consumption, a rise in permits to build coal generation capacity is concerning.

India, the world’s third worst polluter, is also increasing its coal mining output, which German NGO Urgewald expects will double to 1 million tons by 2025. 

The US, the world’s largest economy and second largest polluter, has the world’s third-largest number of coal plants. To meet its net zero commitments, it would have to retire 30GW of coal-fired capacity annually by 2030, while in 2021 it only shut down 8.4GW, per Urgewald’s research.

Unlike some of its G7 allies, like the UK, France and Italy, it has also not set a national end date for its dependence on coal power, no thanks to compromises in the Inflation Reduction Act of 2022.

The actions of these largest polluters not only affects their own decarbonisation plans, but further exacerbates the difference between the global north and south. 

Island nations are at the greatest risk from climate change, yet can do next to nothing about influencing the behaviours of these large, heavy polluting economies, with the magnitude of climate-related disasters worsening every year.

Net zero simply can’t afford new coal-fired capacity

There is no carbon budget left to build new coal power generation capacity, even if the proportion of coal as percentage of total power generated reduces, according to a report by Global Energy Monitor.

Yet governments continue to permit the rise in fossil fuel and coal consumption, justifying their policies as ensuring energy security, and a necessity to drive economic growth.

Electricity rationing due to higher coal prices and artificial energy price subsidies in post-pandemic China, for example, led to blackouts, which was leveraged by coal interests to influence energy policy.

After a freeze on permitting new coal power plants, China permitted 7.3 GW of new coal capacity in the first six weeks of 2022, double the amount of additions in 2021.

The US remains behind schedule in meeting its 2035 goal of carbon-free electricity,  based on retirements in its fleet of coal plants. Provisions in the Inflation Reduction Act of 2022 for upgrades to existing coal plants and funding for carbon capture directed at fossil fuel plants were concessions that detract from the landmark legislation. 

Although coal power construction trends have been on the decline in India since 2015, the forecast rise in coal mining output, and delays in retiring existing coal plants tells a different story.

So, curbing the growth of coal-fired power plants and coal mining requires pressure on another major contributor to the problem – financing.

Money is the root of all evil

While the blame for increased coal use can be placed on the energy crisis, or bad energy policies, a large portion of the blame must also be shared by banks, insurers and large investors.

Reclaim Finance, a climate finance activist NGO, estimates that 190 financial institutions have no coal policy, 272 have weak coal policies, and 28 have effective coal exit policies.

Chinese banks lead on financing coal mining, with China Everbright and China CITIC bank among its largest financiers. China Merchants Bank and Ping An Group were the largest in coal power financing.

The war in Ukraine may cause structural shifts in global energy supply, but none of the indications of this shift seem to suggest a decline in the use of fossil fuels, especially coal, which could increase the long-term financial cost, and local impact, of climate change.

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