During the last decade, the majority of the OECD countries decoupled their economic growth from energy consumption. Normally these rise in tandem – a trend that persists in developing countries and world’s soon-to-be fastest growing and most populous nation, India.
This decoupling happened as developed nations shifted to providing services and building knowledge economies, which is less energy-intensive than industrial production and manufacturing. China too has started down this path. Policy-makers now talk of “decarbonising” the economy. That is, only producing and consuming energy which does not release greenhouse gases into the atmosphere and contributing to climate change.
Decarbonisation is currently focussed in the electricity sector where it is being helped along by policy incentives. Subsidies, guaranteed prices for electricity and tax-breaks dramatically boosted the growth in renewable electricity generation across Europe in the last few years. The liberalisation of Europe’s electricity markets and new regulation improving competition also played a role. Although, falling prices and technology gains spurred the sector’s expansion more than any government policy, particularly for solar power.
For renewables’ expansion to make any difference to greenhouse gas emissions coal-fired power production has to be tackled. Although it is cheap, burning coal releases significantly more greenhouses gases than other fossil fuels including gas in the electricity sector and oil in transportation. Europe’s aging fleet of coal-fired plants are also extremely inefficient at generating electricity compared to newer gas-fired units. A quarter of electricity in the European Union and almost forty-percent in the United States is still generated by burning coal. It is around two-thirds of the electricity mix in China where the resulting air pollution in its major cities is fuelling a sense of urgency.
Political leaders are aware of this danger and are acting to reduce coal production and consumption in many countries around the world. By 2025 all coal-fired power in the United Kingdom will be shut down according to current plans. New Zealand will close its two remaining large-scale coal-fired power plants in 2018. The provincial government of Alberta in Canada, where the tar sands industry alone produces more emissions than Portugal, has announced plans to phase-out coal power over the next fifteen years. China’s goal is to cap coal consumption in 2025 and accelerate its decline thereafter.
President Obama’s Clean Power Plan intends to restrict emissions from current coal-fired power plans, substitute coal with gas-fired or zero-carbon generation and impose strict emissions standards on new plants. The goal is to cut emissions in the electricity sector by a third relative to 2005 levels. Coal mining states have fiercely contested this “war on coal”, which is bound to be difficult for certain towns and regions whose local economy and workforce are dependent on coal mining, not just in the US. Nevertheless, coal needs to eventually exit the electricity sector if the commitments made by the US and 195 other countries at COP21 in Paris late last year are to materialise.
Yet, none of the above is enough to slow climate change. India is set to contribute the greatest share of growth in global coal demand in the future, mostly from increased domestic production. How it intends to reach its goal to produce forty-percent of its electricity from non-fossil fuel sources by 2020 is unclear. In Germany, coal’s resurgence in the power sector has cast a shadow over its achievements in increased generation from renewable resources. Angela Merkel’s government is working on a plan to phase out coal by mid-century. From the European Unions’s biggest economy this is too long to wait. Decarbonising electricity production by phasing out coal remains a long way off. Coal has been condemned by the world’s leaders but not yet replaced.