WHAT follows are some thoughts about coal from a report just published in Australia.
A longer-term concern relates to the environmental impacts of large-scale coal use, especially its climate consequences….
Coal is a carbon-intensive fuel and the environmental consequences of its use can be significant, especially if it is used inefficiently and without effective emissions and waste control technologies. Such environmental consequences include emissions of pollutants such as sulphur and nitrogen oxides, particulates, mercury, and carbon dioxide, the main greenhouse gas. Indeed coal-sourced pollution remains the largest source of greenhouse gas emissions from fossil fuel combustion. Hence most forecasts show a very wide range of future coal demand, based on differing degrees of environmental policy implementation.
Now who might have written that? An environmental campaigner? An anti-coal activist in a less bombastic mood? Maybe they’re the words of an advocate for action on climate change?
Actually, these are the views of Ian Cronshaw, a long-standing advisor to the International Energy Agency who was commissioned by the Energy Policy Institute of Australia to write a report about coal and its future economic outlook.
The Energy Policy Institute of Australia’s board includes a number of figures who have spent their careers in and around the fossil fuel industry.
The paper, The Current and Future Importance of Coal in the World Energy Economy, consists of just three pages, as well as a header page and a biography page at the back.
Most of the contents are drawn from the various reports put out by the International Energy Agency.
So how was this pamphlet greeted by Australia’s coal industry? The only media report of note came from The Australian newspaper, which ran the headline: “Coal will ‘dominate global power sector for decades‘” on its front page.
Here are the first two lines of that story, to give you a flavor.
COAL will dominate the power sector globally for decades to come, according to a paper that miners say undermines campaigns by green activists to “demonise” coal.
The paper – written by an International Energy Agency consultant and to be sent to Industry Minister Ian Macfarlane – says coal will remain the dominant power-sector fuel for at least the next quarter of a century despite efforts to diversify power sources and concerns about slower economic growth.
The report in The Australian does not mention Cronshaw’s observations about coal and climate change.
In fact, the words climate change or global warming don’t appear anywhere in the story, even though it takes up almost a third of the three pages of Cronshaw’s analysis. The Australian also chose to quote two coal industry representatives, who took the report’s publication as an opportunity to criticise environmental campaigners.
Graham Bradley, who amongst other things is the chairman of the advisory board for coal company Anglo American Australian, was reported as saying:
Much of the green polemic is not grounded in the fundamental reality that the world needs the lowest-cost energy and at the end of the day the economics will prevail and investment will follow.
Brendan Pearson, chief executive of the industry lobbyists the Minerals Council of Australia which recently subsumed the lobbying work of the Australian Coal Association, said:
Activist campaigns seeking to demonise Australian coal fail to acknowledge that it will be the principal global energy source for decades – transforming economies and helping eliminate poverty.
Both commentators also touted how the report predicted a rosy future for the coal industry in long term. The report does do this, but with a number of large caveats. It is far from the slam dunk which the media report and the quotes might have you believe. For example, there’s this from the Cronshaw report:
The current economic outlook remains very clouded, with many regions either stagnant or seeing slower economic growth. This will naturally impact heavily on global power use and coal consumption. However, most forecasters remain confident that, over the longer term, energy demand growth in non-OECD countries, the key determinant of coal demand growth, will be strong.
The report does map out the strong growth in the use of coal in non-OECD countries, including India and China, and predicts this is where much of the future demand will come from.
In two sentences, the report also points out the benefits of electricity — which, remember, can and is generated from renewable sources as well as polluting coal. The report says:
Such access to electricity is crucial to economic growth; it means food can be stored in refrigerators, children can do their homework, small businesses can function. And overwhelmingly, this electricity has come from coal.
Cronshaw also makes it clear that under the policies currently in place, coal has a strong future. But this is precisely why climate change campaigners are pushing back hard on the mining and the use of coal, because they see these policies as being far too weak.
One analysis of current climate pledges by governments around the world, released during the recent Warsaw UN climate talks, suggested that pledges on the table will currently deliver about 4C of global warming by the end of the century — a gaping chasm between stated ambitions and reality.
It is worth observing that the IEA’s Current Policies Scenario, essentially a business as usual scenario, has global levels of coal demand more than 20% above the central scenario, in which a range of climate policies are cautiously implemented. The power sector is clearly the key coal market, but this sector must also be the focus of any successful climate change mitigation efforts.
That last line is worth reading twice. The coal sector “must also be the focus of any successful climate change mitigation efforts.”
Cronshaw also says the industry could make early gains in cuts in emissions by improving efficiency, but says that, “In reality, the penetration of the most efficient coal-fired power generation technologies is constrained by technical considerations, additional costs and the absence of a global price on carbon.”
The Australian government is in the process of trying to repeal the country’s carbon price, which would have linked to the European emissions trading scheme.
But again, Cronshaw is clear that coal’s future does depend on environmental policy down the line.
Environmental policy will play a decisive role in future coal consumption. In some countries, coal use may be encouraged for economic, social or energy security reasons. If action were taken to provide electricity access by 2030 to the 1.3 billion people in the world without it today (almost all in non-OECD countries), coal could be expected to account for more than half of the fuel required to provide additional on-grid connections. In other countries, policies may encourage switching away from coal to more environmentally benign or lower carbon sources. While a global agreement on carbon pricing has been elusive, a growing number of countries are taking steps to put a price on carbon emissions, including in China where there are several pilot schemes underway, although current pricing levels seen for example in Europe, are too low to materially affect energy choices.
When Graham Bradley from Anglo American Australia says “at the end of the day the economics will prevail and investment will follow” he seems to be ignoring the view expressed in the report which he lauds, which says that in fact, “Environmental policy will play a decisive role in future coal consumption.”
The paper also has a few words to say about so-called “clean coal” technologies – known as Carbon Capture and Storage. The paper points out that while some progress has been made “CCS has yet to be demonstrated on a large scale in an integrated fashion in the power and industrial sectors, and so costs remain uncertain.”
Cronshaw adds that:
The success of governments globally in encouraging greater energy diversity, improved efficiency, and the development and deployment of clean coal technologies will have a profound bearing on the role of coal in the longer term.
This is an interesting observation, given that both the former and current Australian governments have continued to slash hundreds of millions of dollars from CCS programs.
Despite what you might read in The Australian or through the mouths of vested interests, the future of coal is far from certain.
Just ask the president of the World Bank, Jim Yong Kim, who earlier this week encouraged governments and institutional investors to take their money out of fossil fuels. Or maybe try one group of philanthropists with $1.8 billion in their coffers, who also this week pledged to divest from fossil fuels.
Or how about the US Export-Import Bank – a government institution that approved more than $35 billion in investments in 2012 – which has said it won’t invest in coal projects abroad unless they are fitted with CCS (which as yet, doesn’t really exist commercially).
Clearly coal will continue to be burned for energy, but as even this report the industry cites explains, emissions need to come down, environmental policies will dictate how quickly and that carbon pricing will drive early efficiency gains.
You can of course see this report two ways, depending upon which side you butter your bread. One way is that the report shows how the current suite of policies to cut greenhouse gas emissions are either too few or are not up to the job — probably both.
Another option is to use the three-page pamphlet as a way to instill confidence in potential investors in coal and to convince politicians that it’s an industry worth supporting.
That second group of people just have to hope that policymakers either fail to actually read the report, or don’t take the risks of climate change anywhere near seriously enough.