Global coal demand has been stable at near record highs for the past decade, and if nothing is done, emissions from existing coal assets would be enough to tip the world across the 1.5°C limit, the International Energy Agency said in a report on Tuesday.
The world must move quickly to reduce carbon dioxide emissions from coal in order to avoid “severe” impacts from climate change, said the Paris-based agency, calling for immediate policy action to mobilise financing for clean energy alternatives.
“Over 95 per cent of the world’s coal consumption is taking place in countries that have committed to reducing their emissions to net zero,” IEA executive director Fatih Birol said.
“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.”
In a scenario where current national climate pledges are met on time and in full, output from existing global unabated coal-fired plants will fall by about one-third between 2021 and 2030, with 75 per cent of it replaced by solar and wind, the IEA said.
In the agency’s Net Zero by 2050 scenario, coal use will plunge by 90 per cent by mid-century.
Europe is currently in the middle of its worst energy crisis after Russia, the region’s biggest natural gas supplier, curtailed exports sharply in response to EU sanctions over its military offensive in Ukraine.
To replace Russian gas in the short term, some European countries have brought coal-fired power plants back into operation and this has triggered concerns about their ability to meet climate commitments.
High demand for liquefied natural gas in Europe has pushed up natural gas prices worldwide, prompting many developing countries to replace the low-carbon fuel with coal and crude oil.
“Coal is both the single biggest source of carbon-dioxide emissions from energy and the single biggest source of electricity generation worldwide, which highlights the harm it is doing to our climate,” said Mr Birol.
There is a bright spot in the transition away from coal.
New project approvals in the industry had slowed “dramatically” over the past decade, indicating that there would be fewer new coal assets in the future, the IEA said.
However, there is a risk that the current energy crisis fosters a “new readiness” to approve coal-fired power plants, the agency said.
Germany, which was meant to phase out coal power plants, has changed its plans following the energy crisis. The country has brought back several coal-fired power plants while it scrambles to secure natural gas supplies.
The crisis is expected to worsen in 2023 once Russia halts all exports to Europe.
About half of the 100 financial institutions involved in coal projects have not made any commitment to restrict such financing, the IEA said.
Another 20 per cent of them have made “relatively weak” pledges.
“Favourable economics” alone will not be enough to ensure a rapid transition away from coal for power generation, the agency said.
Coal plants are often shielded from market competition, in some cases because they are owned by incumbent utilities.
Outside China, the weighted average cost of capital of coal plant owners and operators is around 7 per cent.
“Refinancing to bring this down by 3 per cent would accelerate the point at which owners recoup their initial investment, clearing a path for one-third of the global coal fleet to be retired within ten years,” the IEA said.