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Look to the east for the real war on coal

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For all President Trump’s bluster about bringing back coal, the US coal sector seems to be in inexorable decline. More coal-fired power plants are forecast to close in 2018 in the US than in 2015, the largest year yet for coal decommissioning, as they fail to compete against natural gas and, increasingly, with large-scale renewables.

Market forces and technological innovation are gradually pushing coal out of the energy mix. But while there’s good news for the climate from the US coal sector, the picture isn’t so positive on the other side of the world. Across Asia, the proposed construction of hundreds of new coal power plants threatens to derail the Paris Agreement’s goal of holding global warming to below 2°C, warns WWF.

Around 70% of coal consumption is in China, India and the US. But it is China and India which are driving coal plants expansion, with Turkey, Indonesia and Vietnam quickly expanding their fleets. China and India represent over 53% of growth by 2030. The Association of Southeast Asian Nations (more commonly known as ASEAN) will become a key energy market with primary energy demand expands by 76% in 2007- 2030.

New coal threatens Paris goals

If they go ahead, these plants would seriously threaten the global effort to halt climate change, and likely put beyond reach the Paris Agreement’s more ambitious aspiration to keep warming below 1.5°C.

They would also have immediate impacts on public health in the countries in which they are built. According to a study by Chinese and US researchers, the use of coal in China led to around 360,000 premature deaths there in 2013. In 2015, an estimated 500,000 Indians died from particulate pollution, of which coal-fired power plants are a leading source.

These figures illustrate the hidden costs incurred by countries relying on coal. The received wisdom has been that coal represents the cheapest source of power – and, for poor but fast-growing economies, expanding coal-fired generation is a necessary step on the development ladder.

These assumptions always depended on ignoring the ‘environmental externalities’ involved in coal-fired power: the environmental and public health costs born not by those that produce and consume that power, but by society at large.

Renewables are competitive

But even without factoring in those costs, renewable energy is beginning to out-compete coal on its own terms. According to a recent study by the International Renewable Energy Agency (IRENA), new onshore wind farms are selling power at around 4 cents per kilowatt hour, with the best projects reaching 3 cents per kilowatt hour, compared with the 5-17 cent range for new fossil few generation. By 2020, all the major forms of renewable energy are expected to be cost-competitive, without subsidy, IRENA finds.

There are signs that some of the biggest users of coal are moving in the right direction. The Chinese government has set a target to reduce the share of coal in its total energy consumption. Similarly, India has ambitious plans for increased renewable energy generation, and its latest national electricity plan foresees thermal power declining from two-thirds to less than half of generating capacity between 2017 and 2027. The Powering Past Coal Alliance, co-founded by the UK and Canada, in 2017, already has more than 50 countries, regions and businesses committed to phasing out coal power in favour of renewable energy.

No time for complacency

But that doesn’t mean that we can be complacent. Every coal-fired power plant that is built is likely to operate for years, even decades, locking in millions of tonnes of carbon pollution.

Critical to slowing down coal lies in persuading the finance sector that continued lending to the sector is a bad bet. Many development banks, such as the World Bank and the European Investment Bank, have stopped funding new coal mining and coal-fired power. A growing number of commercial banks, particularly in Europe, are phasing out lending to the sector.

Again, the story in Asia is less positive. The Japan Bank for International Cooperation, a state-owned development bank, and the China Development Bank are enthusiastic backers of new coal projects. China, Japan, South Korea and India’s export credit agencies provide loan guarantees to coal projects using equipment supplied by domestic companies.

All four countries are enthusiastic supporters of the Paris Agreement, and they recognise the threat climate change poses to their development, to the economic prosperity of their region and to that of their trading partners. Their state-owned financial institutions should set an example by ensuring their energy sector lending is directed to renewables, rather than fossil energy.

Their commercial banks also need to recognise that fossil fuel generation is a losing bet, and that their funding would be better deployed towards the low-carbon economy of the future.

Even in economies with an apparently insatiable demand for power, there is a real risk that polluting coal-fired power plants might be retired before the end of their useful life, as Asian countries belatedly realise the health and climate change costs they are incurring, and as renewables beat coal-fired power economically within the lifetime of new plants. Bankers would be well advised to look again at their energy sector investments, or risk becoming collateral damage as the war on coal moves east.

Manuel Pulgar-Vidal is the leader of WWF’s global Climate & Energy programme. He is based in Berlin.

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