Coal demand is expected to recover from a sharp pandemic-induced decline as the world economy emerges from the crisis but green investment, technology advancements and well-designed policies can help phase out the dirty fuel.
Stricter environmental policies, carbon taxes and affordable energy substitutes will be crucial to address the hurdles of transitioning to cleaner alternatives, the International Monetary Fund said in a blog post on Tuesday. The shale gas revolution is among the forces accelerating the phase-out of coal.
"Tough questions will need to be asked and answered when considering the policy alternatives supporting a shift away from coal," the fund's economist Christian Bogmans and research officer Claire Mengyi Li said in the co-authored blog post.
Coal is a major contributor to local pollution and climate change, accounting for 44 per cent of global CO2 emissions. Currently, emerging markets account for 76.8 per cent of global coal consumption, about half of which is by China. Power generation accounts for 72.8 per cent of coal use with another 21.6 per cent used by industry.
Policymakers will need to address the plight of coal-dependent workers during the phase-out.
"Coal miners and others who depend on the coal industry for their livelihoods need, and deserve, realistic solutions to the potential disruption they face," the co-authors said.
Other policies are also needed to ease job transitions and potentially encourage the development of alternative industries to avoid disrupting communities and upending families, they said.
For emerging markets and low-income countries, the international community can provide financial and technical assistance and limit financing of new coal plants – at least where alternatives exist.
Cleaner alternatives like natural gas can also help bridge the transition towards a greener future, the authors said.
Even with these actions, the phase-out of coal could take decades. Across a range of developed economies, coal use declined just 2.3 per cent annually during the period between 1971 to 2017. At that rate, it would take 43 years to fully phase out coal, starting from the peak consumption year, the IMF said.
Phasing out coal is most difficult in emerging markets because its use in industry is difficult to replace with other energy sources.
Secondly, coal power plants are long-term assets with a minimum design lifespan of 30 to 40 years and are therefore set to remain unless there is dramatic drop in the prices of renewables or policymakers intervene, the IMF said.
Finally, moving away from coal typically means losses for the domestic mining industry and its workers, which could complicate and delay the phase-out of coal. The transition could risk financial stability in coal-producing countries as banks take losses on investments in obsolete mines and power plants, the authors said.
"And the human element often sees a long, proud tradition of miners and others working in the industry, which makes abandoning this way of life difficult," they said.
