By now, coal, the dirtiest fossil fuel, was believed to be on its way to the industrial graveyard. Thank you, dirty old bully, you gave us a century and a half of cheap electricity; now your time is up, for the good of the planet.
Yet like an elderly person who has had a new heart transplant, charcoal finds a second life and refuses to die. Prices and demand are skyrocketing, and fleets of new coal-fired power plants are being built in high-growth regions of the world.
All of this is painful for Greta Thunbergs around the world, environmental groups, the few enlightened governments that are ridding their power grids of coal power, climatologists around the world and the hosts of the upcoming UN COP26 climate summit. in Glasgow.
The COP26 (acronym of conference of the parties) is in difficulty and promises to be a failure. The Climate Action Network, an umbrella environmental association with members in more than 130 countries, wants the event to be postponed, citing low COVID-19 vaccination rates in dozens of developing countries, as well as high costs travel and accommodation in Scotland. made it impossible for the summit to be “safe, inclusive and fair”.
The network has an absolutely valid point. Many of the poorest countries, such as sinking island states, are the biggest victims of global warming – a potential existential problem they did not create. Their voices need to be heard in Glasgow, but attending the summit can be prohibitive for their health and cost.
The refusal to die of coal is the biggest issue, raising questions about the speed of the much-vaunted energy transition which was to see renewables dramatically accelerating the phase-out of fossil fuels – coal, oil and natural gas – allowing most countries to achieve carbon neutrality by 2050 or 2060.
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A year ago, mining companies and investors who valued coal for power generation and the steel industry seemed ready to accept the fate of this filthy fuel. Coal prices collapsed during the pandemic. As the product’s once-lavish cash flow dried up, investors were happy to see it shut out of mining companies’ portfolios.
Glencore, one of the world’s largest mining and commodity trading companies, is committed to depleting its coal reserves over time. Some of its competitors have announced plans to sell or split their coal divisions as part of their net zero carbon campaigns. Coal is quickly giving way to renewables and environmentalists are applauding. “Charcoal will never recover after coronavirus pandemic, experts say,” read a May 2020 headline in The Guardian.
Energy forecasts are often laughably wrong, and it was with charcoal. Today, coal is hopelessly undead and mining companies cannot supply enough. The price of Australian thermal coal (burnt to generate electricity) has climbed more than 100% this year alone and is up about 300% from its pandemic low. Unofficial reports from coal traders suggest China will import about 10% more coal this year than last year, reaching 220-230 million tonnes.
Some 200 coal-fired power plants around the world are under construction or have building permits, about a quarter of which are in China, despite the country’s commitment to peak its emissions by 2030 and achieve carbon neutrality by 2060. d ‘ a coal plant is 12 years old. Since power plants are typically decommissioned after 40 years, they still have three decades left, meaning their owners won’t let them die prematurely in the name of a COP26 press release.
How to explain the coal rally? The pandemic economic recovery has certainly pushed up prices, as has demand for electricity for air conditioning during a stifling year. Supply constraints helped. Some mining companies have reduced their coal production capacity during the pandemic, and China has deepened the supply bottleneck by tightening security measures at its mines.
At the same time, liquefied natural gas prices have also skyrocketed, making coal more competitive despite its rapidly rising prices. Investor relations officials at large mining companies say shareholders, dazzled by the suddenly high profit margins of coal, are losing their excitement at seeing coal operations unloaded.
All of this does not bode well for COP26, whose organizers would like to strike a deal to see the world’s largest economies phase out coal by 2025. The July G20 summit of energy and energy ministers environment in Italy has singularly failed to make progress on this front. At a minimum, the COP26 summit would like China to end its financing of coal-fired power plants inside and outside its borders. But China is unlikely to end its role as a lender of last resort for less wealthy countries that want a quick and cheap way to increase power generation.
China would like it to be recognized that, although it is the largest consumer of coal and producer of coal-fired electricity in the world, its per capita greenhouse gas emissions are still well below half of the American average. China is also happy to point out that the United States has more installed coal production capacity per capita than it has.
The long-term trend for coal is still downward, as the share of renewables in total energy production will increase over time as the costs of the technology fall. But in the short term, the coal is here to stay, and that means COP26 will have to fight hard to produce more than a depressing final declaration. King Coal has yet to be dethroned.
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