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November 11, 2021

Countries are committing to move away from coal, but major obstacles lie ahead

Despite the continuously growing commitment to reducing the use of coal, there are challenges with how to manage the transition for some countries.

By MarketLine

Coal hit record lows during 2020 but has recovered strongly, raising questions as to whether enough is being done to move away from fossil fuel.

According to the IEA’s energy review, global coal demand declined by 4% in 2020, the biggest decrease in a single year since the Second World War. This was primarily due to the coronavirus pandemic halting economic growth and greatly reducing electricity demand.

This was particularly evident in the power sector, where declines in demand accounted for over 40% of the reduced demand globally in 2020. The US and the EU both reduced their coal use significantly, where their use for power generation fell by a fifth in both.

It is expected that in 2021 the 4% decline in global coal demand will be reversed, with a 4.5% increase expected. The rebound of the demand for coal globally is not uniform. In Asia there has been a large increase in the use of coal for power generation, accounting for three-quarters of the rebound in 2021, according to the IEA.

This presents a difficulty in how to address ending the use of coal as an energy source, as many developing economies are now more reliant on coal than ever.

Shift away from coal is already underway in some countries

Currently, coal is still the most dominant source of energy on the planet and research from the UNFCCC has warned it is a major cause of greenhouse gas emissions. According to in-house research, Coal and Coal Gases account for 30.2% of total power generation globally.

The shift away from the reliance on coal has already begun in Europe and the US and experience so far has shown that it can take decades, due to not only presenting economic challenges and being responsible for thousands of jobs, but social and cultural ones, as the world adjusts to renewable energy being the norm.

Questions have been raised as to whether enough is being done

At a recent discussion at the World Bank’s annual meetings, managing director for Development Policy and Partnerships Mari Pangestu highlighted how progressing away from coal for electricity generation is ‘the single most important step to limiting global warming.’ This presents a huge challenge to countries with how to manage this energy transition without damaging communities and families who depend on the coal industry to survive.

The World Bank Group has developed an initiative to support the transition away from coal while limiting the negative repercussions of this, called a ‘Just Transition For All.’ This initiative has already provided more than $3bn to support coal transitions and works with communities to repurpose former mining land and assets to mitigate the impacts on affected peoples.

There has already been significant progress in this transition as since the 2015 Paris Climate Agreement over three-quarters of planned power plants have been cut worldwide.

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