'Coal pledge’ by nations at COP26 unlikely to see ‘black gold’, a massive CO2 emitter, being phased out

What a paradox? King coal refuses to surrender even as more than 40 countries at the COP26 climate summit at Glasgow pledged to ‘quit coal’. Instead, the global demand for coal and its prices have skyrocketed over the last several months with China, the US and India playing spoilsport. Global climate may continue to worsen in the coming years as some of the world's biggest coal-dependent countries, including China, the US and India, did not sign up. More surprisingly, the heads of states of China and Russia, both fossil fuel guzzlers, chose to absent themselves from the climate summit.

China is the world’s biggest producer as well as consumer of coal and CO2 emitter. Coal is branded as the single biggest contributor to climate change. In fact, coal accounts for 40 percent of the global energy production, according to the International Energy Agency (IEA). It continues to be a highly sought after energy source along with other fossil fuels in many parts of the world despite being the worst offender in terms of CO2 omissions.

In India, thermal power accounts for nearly 70 percent of electricity generation. Though the country is going for non-conventional energy, including solar power, in a big way, it is yet to pose much of a threat to India's thermal power generation and demand. New coal mines are commissioned almost every year. Existing mines are pressed to produce more coal.

UK shadow business secretary Ed Miliband has said that there were "glaring gaps" from China and other large emitters who have not committed to stop increasing the use of coal domestically. He also noted that there was nothing on the phasing out of oil and gas.

Going by the latest global demand surge for coal, climate campaigners may have to accept the bitter fact that the commodity is unlikely to go down without a fight. It may take much longer to “consign coal power to history.”

The IEA holds coal power generation responsible for 46 percent of global carbon emissions. To stave off the worst effects of climate change, it says, governments need to slash coal’s share of global power supply to less than one percent. However, to the discomfort of climate campaigners, coal usage has strongly rebounded in the past several months, wiping out declines in 2020 and interrupting a decades-long downward trend of coal use in advanced economies.

In the international commodity market, coal futures have fast erupted, climbing 400 percent in some regions to reach record highs. Interestingly, shares in US coal producers have recovered from all-time lows. In the case of the Peabody Energy Corporation, which has business interests in 17 large active coal mining operations in the US and Australia, shares have rallied over 700 percent in 12 months.

Back home, government-owned Coal India Limited (CIL), the world’s largest coal mining company, is producing and despatching more coal this year. Demand for coal in India far outstrips supply despite nearly 15 percent more coal sent to power plants this year. The overall coal production in last September significantly increased to 51.7 million tonnes (MT) as compared with 38.9 MT in September 2020 and 39.5 MT in September 2019, registering a growth of 33 percent year-on-year and 31 percent when compared with September 2019 production.

On a cumulative basis, India’s coal production increased by 12 percent during April-September 2021 period as compared with the corresponding period of last year and 5.5 percent compared with the same period of 2019.

Coal production generally slows down during the monsoon and an extended monsoon this September has impacted mining operations in India. The share price of CIL reached a 52-week high at Rs. 204 from the lowest level of Rs.119.75 during the period.

Across Asia, thermal coal prices hit new highs in September as power plants in China and India reported critically-low levels of inventories to meet robust power consumption. China and India jointly account for 65 percent of global coal use. They are also the world's two biggest importers of the fuel, followed by Japan and South Korea.

India’s low nuclear power capacity has also made the country more dependent on coal power generation. While domestic coal demand is growing strongly, that is not the case for supply.

The most-traded thermal coal futures contract on China’s Zhengzhou Commodity Exchange has jumped to a record high of 979 yuan (US$151.63) a tonne. Chinese futures for coking coal, used mostly in steelmaking, also surged. Strict supply controls in China have been a catalyst behind the latest price surge.

Coal prices from Australia and Indonesia, both major exporters, also scaled all-time highs recently, with Australia's Newcastle prices rising roughly 50 percent and Indonesian export prices up 30 percent in the last three months.

The most positive part of the COP26 climate summit at Glasgow is that 20 countries, including the US, pledged, in a separate commitment, to end public financing for "unabated" fossil fuel projects abroad by the end of 2022. Such projects burn fossil fuels, like coal, oil and natural gas, without using technology to capture the CO2 emissions. Several major coal-using countries such as Poland, Vietnam and Chile committed to shift away from coal.

Signatories to the ‘coal pledge’ have committed to ending all investment in new coal power generation domestically and internationally. They also agreed to phase out coal power in the 2030s for major economies, and the 2040s for poorer nations. Dozens of organisations also signed up to the pledge, with several major banks agreeing to stop financing the coal industry.

Yet, it is true that the end of coal is not immediately in sight.

Unfortunately, the developed countries are yet to consider seriously the need for accepting the climate finance responsibility. The climate pledge will probably remain unfulfilled in the absence of a climate funding commitment on the part of rich countries.

(IPA Service)

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