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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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G7 Agrees To End Coal Use But Can It?

  • The United States, the UK, Italy, France, Japan, Germany, and Canada this week struck an agreement to end the use of coal for power generation by 2035.
  • Coal as a source of power generation across the G7 economies accounted for about 15% of the energy mix.
  • Despite big additions of renewable energy capacity, it is uncertain whether the G7 would be able to give up coal completely.
Coal Mine

The United States, the UK, Italy, France, Japan, Germany, and Canada this week struck an agreement to end the use of coal for power generation by 2035. The news was lauded by some in the green lobby while others, namely Greenpeace, called it “too little, too late”. Now, the biggest question is whether the G7 will turn words into actions—or rather, can it?

Coal as a source of power generation across the G7 economies accounted for about 15% of the energy mix, according to data from climate nonprofit Ember cited by Reuters’ Gavin Maguire in a review of the commitment and its potential impact on the seven economies.

This is not a whole lot, and it is substantially less than the G7 used to generate electricity 20 or 30 years ago. Yet a 15% share in the energy mix may turn out harder to quit than maybe expected, at least for some of the G7 members—such as Germany and Japan, which sourced 25% and 29% of their electricity from coal, respectively. And this is why the agreement has a catch.

The catch is the same stipulation as one recently approved by the U.S. Environmental Protection Agency regarding emissions from power generation. Per that stipulation, all coal and new gas-fired power plants need to either install carbon capture systems or shut down by 2039. The G7 agreement is the same, only the deadline is 2035.

The G7 energy ministers who gathered in Turin, Italy, to sign the commitment gave off the general impression of being really determined to end emissions from coal burning—although one might need to add that referring to these emissions as “carbon pollution” is inaccurate because of the definition of the word “pollution,” which involves toxicity. But the real test would be whether the governments that come after them would stick to this agreement or go another way.

Related: Japan Loads the World’s Biggest Nuclear Reactor With Fuel

They may well do just that, too. Because ending coal generation in seven of the world’s biggest economies will only make it cheaper for other big economies such as China and India, both of which quite like a bargain. Other, poorer nations in Asia would only increase their use of coal because once the G7 end the use of coal, they would be forced to use more gas.

There is no realistic way in which wind, solar, and even new nuclear would be able to completely replace lost coal capacity. Wind and solar are not dispatchable generation capacity, and this is one reason for the continued demand for hydrocarbons. Perhaps the best evidence of this fact was Germany’s decision last year to take down a wind farm in order to expand a coal mine with a view to boosting coal power generation—despite its fast buildup of wind and solar.

A new nuclear power plant, meanwhile, takes years to build, seeing as the small modular reactor trend has recently lost steam, leaving the old-fashioned large reactors as the only tried and tested kind of nuclear. Gas demand, then, would soar to satisfy the spike in demand from the G7, repeating what happened with Europe and Asia in 2022 but on a larger and likely more durable scale.

This is the supply side of the energy equation, but what about the demand side? There is even less good news in that area for the ambitious G7 energy ministers and their bosses. Because demand for energy is on the rise and this rise is about to become a lot more intensive as artificial intelligence deployment gathers pace, which most analysts appear to agree will happen.

The AI factor is especially visible in the United States, where most of the AI work takes place. AI computing uses a lot more energy than non-AI computing, driving a surge in the demand for electricity. This expected surge already has gas producers in the U.S. making plans for production growth in response—because wind and solar won’t cut it.

Yet AI, data centers, and the production of semiconductors for the booming information technology industry are not the only factors driving higher demand for electricity. There is industrialization outside the G7, too. And industrialization, which is making life a lot better for millions of people, inevitably drives higher energy demand, notably including electricity.

“The reality is we can keep adding renewables until we’re blue in the face and it won’t be enough,” the chief executive of one of India’s biggest wind and solar companies, ReNew, told the Wall Street Journal recently.

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So, it is uncertain whether the G7 would be able to give up coal completely—even the UK, which only generates a small portion of its electricity from coal had to reopen a plant during a period of low wind power generation. But even if they do—however high the cost—this leaves the rest of the world, which would start using more coal, not least because it would become even cheaper. The net effect of the G7 coal phaseout, if it ever materializes, may actually add to global emissions.

By Irina Slav for Oilprice.com

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  • O J on May 04 2024 said:
    Coal is in terminal decline. I'm surprised you used the uk as an example for how coal is impossible to replace, considering the facts. In 2012 coal powered over 40% of UK electricity yet in the last 12 months it supplied only 1.2%. There is only one coal powered plant still operating in the UK and it is due to close this September. As for gas it is also in decline. At its peak in 2016 gas supplied around 43% of electricity yet in the past 12 months it has dropped to 31%. Now that coal is almost gone from the energy mix the reduction in gas use will accelerate. Wind and solar.are cheaper and utilities are commercial operations, why would they choose the more expensive options.

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