Financial support needed to help developing nations transition away from coal

Pictured: Coal power generation in North Rhine-Westphalia

The new IEA special report – Coal in Net Zero Transitions: Strategies for Rapid, Secure and People-Centred Change – provides the most comprehensive analysis to date of what it would take to bring down global coal emissions. While coal emissions have fallen in developed nations, coal demand globally has been stable. The IEA warns that, if nothing is done, emissions from existing coal plants globally would push the world past the 1.5C limit of the Paris Agreement.

The report notes that while the majority of current coal consumption globally falls within nations that have pledged to net-zero emissions, a just transition needs to be delivered to help communities switch to low-carbon technologies.

The IEA states that there are around 9,000 coal-fired power plants around the world, accounting for 2,185GW of capacity. Age profiles vary by region however, from an average of 40 years in the US to 15 in developing economies. As such, many countries need short and medium-term finance support to help them switch to clean energy. The IEA highlights Indonesia, Mongolia, China, Viet Nam, India and South Africa as nations that have complex transition scenarions.

If operated for typical lifetimes and utilisation rates, the existing worldwide coal-fired fleet would emit more than the historical emissions to date of all coal plants that have ever operated, the IEA notes. This excludes coal projects in the pipeline.

“Over 95% of the world’s coal consumption is taking place in countries that have committed to reducing their emissions to net zero,” said IEA Executive Director Fatih Birol. “But while there is encouraging momentum towards expanding clean energy in many governments’ policy responses to the current energy crisis, a major unresolved problem is how to deal with the massive amount of existing coal assets worldwide.”

“Coal is both the single biggest source of CO2 emissions from energy and the single biggest source of electricity generation worldwide, which highlights the harm it is doing to our climate and the huge challenge of replacing it rapidly while ensuring energy security,” Dr Birol said. “Our new report sets out the feasible options open to governments to overcome this critical challenge affordably and fairly.”

The IEA notes that under a scenario where national climate pledges are met on time, output from coal plants falls by 33% between now and 2030, with 75% replaced by wind and solar. However, current climate pledges are not all in alignment with net-zero. If net-zero was to be met and the 1.5C limit achieved, coal use needs to fall by 90% by mid-Century.

The IEA is calling on governments to provide incentives that allows investors to support the transition away from coal. The IEA finds that around 50% of the 100 financial institutions that have supported coal-related projects since 2010 have not made any commitments to restrict such financing. Only 20% of these institutions have made “weak” pledges to end coal financing, the report notes.

Commenting on the report, Michael R. Bloomberg, UN Secretary-General’s Special Envoy on Climate Ambition and Solutions and founder of Bloomberg LP and Bloomberg Philanthropies, said: “Coal-fired power plants are on the decline, but not at the pace we need to save lives and win the battle against climate change. By scaling investment in clean energy, we can achieve a complete phase-out of coal plants in advanced economies by 2030 and the rest of the world by 2040.

“On the other side of this transition is a stronger economy and healthier communities – and we have no time to waste getting there. This IEA special report is an essential guide on the practical steps that governments and the private sector can take, including financial institutions and investors.”