As European energy and environment ministers join their peers at the International Energy Agency’s COP26 Net-Zero summit, they must set the pace for the global phase-out of coal, writes Maria Mendiluce.
Maria Mendiluce is CEO of the We Mean Business Coalition, which brings together several international not-for-profit organisations to catalyse business action and drive policy ambition to accelerate the transition to zero-carbon.
“The world still has a “fighting chance” to limit global warming by ending dependence on coal,” UN Secretary-General António Guterres said earlier this month.
For the world to reach net-zero, all developed countries need to achieve near-total electricity decarbonisation by the mid-2030s. This means eliminating coal use almost immediately and implementing clear plans to phase out unabated gas use for power.
For Europe, this is a huge opportunity to showcase its leadership on climate action by accelerating the global coal phase-out. Today, 15 European countries have committed to completely phasing out coal power and three have already become coal power-free.
This strategy makes sense for Europe to recover from the COVID-19 crisis in a way that is better for jobs, health and economic growth. As Frans Timmermans and Mike Bloomberg recently said: “Ending coal subsidies will save lives.” By leading the way, Europe will send a powerful signal across the world which would accelerate the widespread adoption of renewables.
Power markets are already moving away from coal. Last month, Portuguese power utility EDP announced it would be coal-free by 2025. And Spain’s largest bank Santander pledged to stop servicing power generation clients with more than 10% of revenues from thermal coal and will cut all exposure to thermal coal mining.
On top of this, 119 European companies are driving strong demand for renewables by committing to switch to 100% renewable power through the RE100 campaign. Over 50 members have already announced they have reached 100% renewable electricity and 65 members are using over 90% renewable electricity.
And mining companies are already moving away from coal – Rio Tinto Group sold its last mine in 2018. Anglo American Plc and BHP Group are moving away from coal and Glencore Plc, long the largest producer of seaborne thermal coal, plans to run down those assets by 2050.
Access to coal finance is already reducing due to the fall in value of coal assets which has accelerated since the onset of the pandemic. The energy sector is now the smallest sector in the S&P 500. Since its inception in 2012, the S&P 500’s Fossil Fuel Free Total Return Index has consistently outperformed the S&P 500 overall.
The trend in renewables is the exact reverse. As of 2019 and 2020, the share of global electricity generation investment in renewables exceeded 50%, suggesting that an economic tipping point has indeed been reached. The costs of renewables have fallen so far that new renewables outcompete new coal virtually everywhere.
For the many European businesses that are already harnessing the benefits of renewable power, a strong signal to stop financing coal from governments could help them go one step further. For example, they could call on their suppliers to remove coal from their manufacturing processes which would then have a ripple effect to accelerate coal phase-out across the globe.
In the EU there remains just 142 GW of coal-fired generation – which makes this a very feasible phase-out target right across Europe. In fact, Germany and Poland are currently the only countries that want to exit coal after 2030.
All European national governments now need to set 2030 phase-out dates, implement moratoriums on future coal projects and commit this year to an end to coal finance. Governments must also provide transition financing for workers and communities reliant on high carbon sectors – a report by the Rocky Mountain Institute, Carbon Tracker and the Sierra Club outlines how this might be achieved.
And the Corporate Leaders Group research found that in the Romanian power industry, for example, the renewables industries can provide new opportunities for highly skilled engineers and technicians from the coal workforce.
As electrification of other areas like heat and transport now underway and play a key role in achieving net-zero, the coal phase-out and switch to renewables is urgent and highly desirable. If the transition is not swift enough, technologies like renewables and electric vehicles will be unable to achieve their full emissions reduction potential.
Another important element is the coal embedded in the production of materials such as steel. Companies that have committed to net zero emissions will need to reduce the emissions from their supply chains and will soon start to look at the carbon footprint of the products they use. For heavy industry, coal is no longer a necessity.
Scaling up investment into innovation around hydrogen technology is critical. While gas may be used as an interim fuel to remove coal from value chains in the immediate term, business and governments must be wary of investing much in gas infrastructure, since it will also need to be phased out.
A rapid European transition away from coal and into clean power brings multiple benefits. As we emerge from the COVID-19 crisis, the imperative to improve health and protect jobs is particularly front of mind.
Research published last month shows that fossil fuels are responsible for more than 8 million premature deaths annually. That’s double the previous high-end estimate of fine-particle pollution mortality, and three times the combined number killed by HIV/AIDS, tuberculosis, and malaria in 2018.
And our recent report demonstrated that for Germany, Poland, Spain and the EU as a bloc, focusing Covid-19 economic stimulus measures on boosting renewables, upgrading electricity grids and improving energy efficiency would create more jobs and growth than traditional economic stimulus measures, like reducing sales tax.
It’s time for Europe’s energy ministers to get serious about banning coal from industry operations and products used. It’s good for the health of Europeans, it’s coherent with the EU net-zero goals, it’s imperative to stop unnecessary GHG emissions around the world. We have technology alternatives, and it makes economic sense.
This is a historic turning point: Europe heralds the end of coal and lead the world on a pathway to cleaner air, renewable energy with more and better jobs and create resilient economies.