As 2020 meant a slowdown in coal production and use, experts and governments were confident that the industry would pick up again as pandemic restrictions eased. However, going into 2021, it seems coal is not set to make a comeback. Pre-2020, South and Southeast Asia looked to become the biggest coal-demand region in the world, with several countries investing heavily in extraction and coal plants. But as the implications of Covid-19 took a toll on the industry around the world, the anticipated bright future of coal in Asia is looking increasingly uncertain.
According to a report published by Global Energy Monitor (GEM), large emerging Asian economies Bangladesh, Indonesia, the Philippines and Vietnam cancelled as much as 45GW of coal power during 2020. While coal appeared the obvious answer for short-term energy supply across Asia, the experience of the energy sector in 2020 has made many look towards renewables for the future of energy.
In Vietnam, the draft Power Development Plan outlined plans to cancel seven coal plants and postpone six more until the 2030s, which may never be developed. These account for approximately half of the country’s planned coal development.
In December in Pakistan, Prime Minister Imran Khan announced that no more coal plants would be constructed in the country. The cancellation of coal plants was also announced in The Philippines in November.
Many of these cancellations come in response to a lack of funding in the sector. Public pressure on banks to move away from fossil fuels towards renewables has driven many institutions to withdraw funding from coal production.
For example, in December the Malaysian bank CIMB announced its exit strategy to phase out coal financing, having invested $2.6 billion in coal over the last decade. It was the first major bank in an emerging economy to state such plans.
CIMB aims to support the objectives of the Paris Agreement by phasing out coal financing by 2040. Tim Buckley from the Institute for Energy Economics and Financial Analysis (IEEFA) explained, “This admirable move is expected to be the catalyst for a range of CIMB peers across [South-East Asia] to better align their lending practices with the technology driven energy system disruption that is accelerating as 2020 unfolds.”
Similarly, the AES Corporation announced the sale of its interest in the 1,242 MW Mong Duong 2 coal-fired power plant in Vietnam last week, expected to take place at the end of 2021. AES CEO Andrés Gluski stated, “we look forward to contributing to the country's transition to a more sustainable energy future.". He made clear the company’s intention to invest in renewables moving forward, continuing to invest in energy in Vietnam and other areas of Asia.
While many suggested a ‘renaissance’ of the coal industry throughout 2020, this is looking evermore doubtful. Several big funds are moving away from coal, including Australia’s biggest super fund, AustralianSuper, and Norway’s Government Pension Fund Global; which has a tight cap on its coal investments.
In addition to a reduction in financing from major funders, energy companies are themselves hinting at a movement away from coal. Glenmore, the western world’s biggest coal producer, stated plans for a “managed decline of its coal business” and net-zero emissions by 2050 in its annual investor update. This suggests a gradual but eventual shift away from coal.
Generally, despite optimism for a coal comeback throughout 2020, the realities of 2021 suggest otherwise. Pressure to invest more heavily in renewables and the lack of economic incentive to develop the coal industry further means that the coal era may be coming to an end.
By Felicity Bradstock for Oilprice.com
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