A long-term abandonment of dirty fossil fuels accelerated during the lockout, resulting in power plant closings in several countries and providing new evidence that humanity’s use of coal may have finally peaked after more than 200 years.
This makes the most unfavorable climate scenarios less likely, since they are based on a continuous expansion of coal for the rest of the century.
Even before the pandemic, the industry was under pressure due to increased climate activism, divestment campaigns and cheap alternatives. The foreclosure exposed its weaknesses even further, wiping out billions of market estimates from the world’s largest coal miners.
As demand for electricity has plummeted, many utilities have initially cut coal because it costs more than gas, wind and solar. In the EU, coal imports for thermal power plants have fallen by almost two-thirds in recent months, reaching lows never seen in 30 years. The consequences have also been felt around the world.
This week, a new report from the US Energy Information Administration predicted that the United States will generate more electricity this year from renewable energy than coal for the first time. Industry analysts predict that the share of coal in US power generation could fall to just 10% in five years, down from 50% a decade ago. Despite Donald Trump’s election campaign to “dig the coal,” there are now more job losses and closings in the industry than ever since Eisenhower’s presidency 60 years ago. Among the most recent is Great River Energy’s plan to shut down a 1.1 gigawatt thermal power plant in North Dakota and replace it with wind and gas.
Rob Jackson, president of the Global Carbon Project, said the pandemic is likely to confirm that coal will never again reach the global peak seen in 2013: “Covid-19 will reduce carbon emissions so much this year that the industry will not ‘will never do, even with continuous development in India and elsewhere. The collapse in prices for natural gas, record solar and wind power, and climate and health issues have permanently undermined the industry. “
The discs fall thick and fast. The British national grid had not burned a single piece of coal for 35 days on Friday, the longest uninterrupted period since the start of the industrial revolution more than 230 years ago. In Portugal, the record coal-free journey lasted almost two months, recently reported the campaign group Europe Beyond Coal.
Last month, Sweden closed its last coal-fired power plant, KVV6 in Hjorthagen, east of Stockholm, two years earlier, because the mild winter meant it was not in use before the pandemic hit. Austria followed suit with the closure of its only remaining coal-fired power station in Mellach. The Netherlands has said it will reduce the capacity of its thermal power plants by 75% to comply with a court ruling to reduce climate risks.
More importantly, in India – the second largest consumer of coal in the world – the government has prioritized cheap solar power over coal in response to a drop in demand for electricity caused by Covid- 19 and a weak economy. This has led to the first annual decline in carbon emissions in four decades, exceptional air quality and growing public demand for more renewable energy.
Elsewhere in Asia, the picture is mixed. A few years ago, Indonesia, Vietnam and the Philippines were supposed to be the main growth sectors of the industry, but the pandemic, falling prices of renewable energies and a growing divestment campaign put several large coal projects. South Korean President Moon Jae-in was re-elected on a promise to phase out domestic use of coal, and many in his ruling coalition are pushing to end funding for overseas projects. In Japan, the three major commercial lenders and the governor of the Japan Bank of International Cooperation recently said they would no longer accept proposals for coal production.
Other money taps are also closed, as investors and financial companies respond to the scientific advice and campaigns of divestment activists and school strikers like Greta Thunberg.
“The coal economy was already under structural pressure before the pandemic,” said Michael Lewis, head of climate change investment research at French bank BNP Paribas. “And out of it, those pressures will still be there – but now compounded by the impact of the pandemic. “
BNP Paribas is one of a growing list of financial institutions that have chosen to cut ties with coal. The bank said last week that it would accelerate its planned exit from coal financing by 2030 to align its portfolio earlier with Paris’s climate targets.
In the same week, the Norwegian sovereign wealth fund – the largest in the world – abandoned a multitude of coal and energy companies, including Glencore, Anglo-American, Vale and AGL for climate reasons. This follows coal blacklisting announcements by BlackRock, Standard Chartered and JPMorgan Chase.
Fossil fuel has fallen out of favor in the eyes of many investors due to growing climate concerns, cheaper alternatives to renewable energy and a public response to air pollution.
“The public health benefits of cleaner air will be at the center of concern after weeks of foreclosure that has brought blue skies and clean air to mega cities in Asia,” said Lewis. “This pressure from the financial sector will only accelerate in the future, driving the cost of capital for coal projects even higher. “
Even before the pandemic, Australian coal companies said they had difficulty finding funding for mines and port facilities due to the international divestment campaign. It is not the only economic tightening. A nearly 30% drop in the price of thermal coal made more than half of production unprofitable, prompting several companies to prevent well closures and layoffs.
The elephant in the room is China, which burns half of the world’s coal and is the largest financier of mines and power plants in Asia and Africa – largely to provide an export market for its domestic businesses manufacturing and engineering. Domestic consumption of coal fell a few years ago, raising hopes that President Xi Jinping has committed to abandoning the production of dirty, high-emission electricity. But after the lockdown, the political priority is to revive the economy. Provincial governments are currently working on a multitude of new thermal power plants. But they are operating at less than half their capacity because demand for coal has not returned to its previous level.
“Covid-19 made it clear that China and India have built more than necessary. Even before the crisis, they had overcapacity. Now, with lower demand, you can see that everything is a mess, “said Carlos Fernández Alvarez, senior coal analyst at the International Energy Agency.
Alvarez said coal has been hit hardest by the pandemic, but warned that the decline could be temporary unless governments invest in renewable energy to break the deadlock. “We have to look at this structurally. If there is again a strong demand for energy in the future, it will probably be coal which will take over because it is the marginal supplier, “he said.
While no one expects coal to be gone anytime soon, Ted Nace, director of Global Energy Monitor, says the balance has definitely changed. “Coal is definitely in recession and this pandemic will accelerate this. Demand is expected to return to some extent next year. But there is a very strong argument that it is not just going to bounce back. “