Phasing out coal in some places may increase consumption in others – study

Bi and his team used Dynamic Policy Evaluation, a data-driven approach for simulating real-world policy making. The most shocking result was that even if most countries decided to stop burning coal for electricity, this has almost zero impact on total future coal use.

Investigating the Powering Past Coal Alliance, launched at the world climate summit COP23 in 2017, the scientists sought to understand whether these countries’ efforts to cut coal would make it easier or harder for other countries to follow suit. That is, the coalition may grow as member states work to modernize their electricity sectors, but it may also lead to a rebound in coal use globally.

The latter effect, often referred to as “leakage,” can arise due to market effects: if demand decreases in some places, so do prices, which in turn can increase demand elsewhere.

Interestingly, the scientists’ computer simulation shows that the most concerning leakage effect, in this case, may arise within the alliance itself rather than through international coal markets. Although the Powering Past Coal Alliance is expected to grow, its pledge is limited to the electricity sector. This means that countries who join can increase their coal use in steel, cement and chemicals production, greatly hindering the potential of this initiative.

“The greatest risk to the coal exit movement may actually come from free-riding sectors in coalition members. Unregulated industries can take advantage of falling coal prices at home and use more coal than they otherwise would have,” co-author Nico Bauer said.

The scientists conclude that additional strong policies are needed to avoid this effect.

“The coal exit debate has to look beyond the power sector and also include the heavy industry. Carbon pricing would be the most efficient instrument to close loopholes in domestic regulations, while restrictions on coal mining and exports would go the furthest to deter free-riding abroad,” Bauer said.

China plays key role

China plays a special role since it produces and consumes more than half of all coal globally.

According to the researchers, the Chinese government must act swiftly to curtail the coal-driven covid recovery.

“The current coal plans jeopardize China’s recent promise to peak domestic emissions before 2030 and to achieve net-zero emissions by 2060. The computer simulation gives China roughly fifty-fifty odds of joining the Alliance, and it only falls on the right side of that line if it stops building coal plants by 2025,” Bi said.

Further, the simulation shows that the Alliance only manages to boost solar and wind energy expansion if China decides to phase out coal.

China would thus have “a golden opportunity to solidify its leading role in the renewable energy market and unleash sustainable development opportunities worldwide, but this requires a commitment to phasing out coal,” the researcher pointed out. “If not, then it becomes less clear how we’ll achieve sufficient diffusion of renewables worldwide. China’s actions today can position it to either lead or impede the global energy transition.”