Will Ukraine war revitalize coal – the world’s dirtiest fossil fuel? | Climate Crisis News

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The president of last year’s COP26 may have called for it to be “consigned to history” but demand for little-loved coal, the world’s dirtiest fossil fuel, has surged in recent weeks.

Russia’s invasion of Ukraine and the unprecedented economic sanctions that have followed have thrown the global energy market into chaos, sending fossil fuel prices soaring and raising questions in many countries about whether climate ambitions need to be softened in order to keep the lights on.

Though Western sanctions have not yet directly targeted Russian oil, coal or gas, the European Union has announced plans to end its energy reliance on Russia, while companies across the globe, wary of reputational and financial risks now associated with the country, look to suppliers elsewhere.

German Chancellor Olaf Scholz rebuffed calls from some EU states to widen sanctions and embargo all Russian energy, telling the Bundestag on Wednesday that such measures would have the effect of “plunging our country and all of Europe into a recession”.

However, the EU is already diversifying its sources for fossil fuels, he said. Europe is particularly reliant on energy imported from Russia, from where it sources 45 percent of its coal, 40 percent of gas, and 25 percent of its oil.

The 27-state bloc has pledged to reduce its greenhouse gas emissions by 55 percent by 2030, based on 1990 levels, and achieve net-zero emissions by 2050.

To adapt to the continent’s energy crisis, coal appears an obvious short-term choice given a lack of existing liquid natural gas infrastructure. France has temporarily allowed power plants to burn more coal, Italy has raised the possibility of reviving decommissioned coal plants, and Germany has announced plans to build its coal reserves and signaled its coal phase-out date may have to be delayed.

“This is a bit of a stress test to the way countries have been managing energy transition,” said Pieter de Pous, climate and energy policy adviser at climate change think-tank E3G.

“Countries that were doing this properly, avoiding gas as a bridge fuel option, are in a better situation than those who really were betting on gas to get out of coal.”

Dizzying price increase

Russia is the world’s third-largest supplier of thermal coal, used mainly for power generation. Other leading producers, including Australia and South Africa, are already experiencing increased demand from both the Asian and European markets, far outstripping available supply.

The price of coal futures at Australia’s Newcastle port, a key benchmark for the Asian market, the world’s largest, stood at $ 325 per tonne on Wednesday, below the peak of $ 441 seen earlier this month, but still more than double where it stood at the beginning of the year.

Meanwhile, shares in major coal miners such as Glencore, Sasol, and Peabody Energy have almost doubled since January.

Coal demand was already increasing through 2021 as gas prices rose, an effect intensified by the Ukraine conflict.

A briefing note from BloombergNEF named several factors driving coal’s dizzying price increase. On the demand side, Europe’s whetted appetite comes just as coal consumption is growing in Asia, as economies rebound from the pandemic.

It also highlighted several supply constrictions in coal-producing countries: not only the threat of sanctions on Russian coal, but floods in mining regions in Australia, export restrictions in Indonesia to address domestic shortages, and a series of mining accidents in China.

“There is simply an almost complete absence of surplus thermal coal available globally,” said Steve Hulton, vice president of coal at Rystad Energy, earlier this month.

‘Climate Faustian bargain’

While coal’s unexpected surge in popularity will reap major profits for businesses still active in the sector, it is unlikely to reverse the long-term costliness and undesirability of coal in the United States and the EU, analysts told Al Jazeera.

“There may be some cases in which European countries are forced into a short-term climate Faustian bargain, temporarily increasing coal use as a measure of last resort in return for a faster phase-out of fossil gas, and especially Russian fossil gas,” said Tim Gore, head of the Low Carbon and Circular Economy program at the Institute for European Environmental Policy (IEEP).

“But such measures can only be short-lived if the EU is to meet its legally binding 2030 climate target.”

The crisis has revealed the dangers of relying on gas as a transition fuel, and shown a rapid expansion of renewables and improvements to energy efficiency are the best route to hitting the EU net-zero goals, added Gore.

The situation is somewhat different in Asia, which is far more reliant on coal for energy production.

While the International Energy Agency predicts a sharp decline in coal-fired generation in Europe and the US between 2021 and 2024 as the share of renewables increases, it is expected to rise by 12 percent in Southeast Asia, 11 percent in India, and 4.1 percent in China over the same period.

Concerned by global energy shortages and the possibility of an economic slump, China has approved new coal mines and increased coal output by 10 percent in the first two months of this year when compared to the same period in 2021.

India, the world’s second-largest coal consumer, has also planned to ramp up domestic production to cut its reliance on imports. The state-run Coal India has set a target of 670 million tonnes for this fiscal year.

However, the long-term prospects of coal-generated energy remain dim. Not only do coal plant operators face spiking input costs, but financing options are quickly dwindling.

State and institutional backers are shedding coal to ensure greener portfolios and hit net-zero targets, meaning the cost of borrowing to fund new machinery or infrastructure at coal mines and plants has risen considerably over the past decade, just as the cost of funding renewables has decreased.

In the US, 80 percent of coal plants either cost more to operate than replacing them with wind or solar plants, or are scheduled for closure, one study found.

“Renewables are still the cheaper source of new capacity in most countries… those fundamental dynamics have not changed,” the Pope told Al Jazeera. “They will continue to mean that’s where the direction of travel is going.”



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