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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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Coal Is Dead, But China Is Reviving It

When the news broke that a startup funded by Bill Gates had succeeded in generating temperatures of more than 1,000 degrees Celsius using solar energy, it dealt a blow to coal. After all, heavy industries are one of the last strongholds of the fossil fuel because of its ability to produce super high temperatures that solar and wind couldn’t even come close to--until now. But even with that solar breakthrough, coal, dirty or not, is far from dead.

A Steady Decline in Consumption

The cheapest of the fossil fuels is still a popular one among smelters and power utilities. Its consumption on a global scale is indeed declining, but this decline only began in the current decade. Recently, a study projected that this year will see a record coal use drop of 3% globally, but the end of coal is still not in sight.

"It is clear that the economics of coal production no longer make sense in many parts of the world where it is simply cheaper to generate electricity from natural gas and renewables," a climate change researcher told the BBC last month.

Yet there are many other parts of the world where coal still makes the best economic sense for a variety of reasons, including lack of access to renewable technology and the funds to invest in it. 

Enter China’s Belt and Road Initiative ...

One Belt, One Road, Powered with Coal

The Belt and Road Initiative is an ambitious international investment program devised by Beijing that involves infrastructure projects worth a total of $12 trillion and spanning as many as 126 countries

Most of these are developing countries and many have yet to join the renewable crusade against climate change. But coal is widely available and cheap, so it will power the industrialization of these countries with China’s financial help. Related: Saudi Arabia Threatens To Flood Oil Markets If OPEC Members Don’t Cut Output

A study by Global Energy Monitor cited by Corporate Knights estimates that the countries covered by the Belt and Road initiative could end up producing 66% of the world’s carbon emissions by 2050. That would increase their current level of accounting for 28% of global CO2 emissions and would cancel out the rest of the world’s efforts in restraining temperature rises to 2 degrees Celsius.

But is coal the single culprit for emissions? Hardly.

An Ironic Twist that Smells of Gas

A recent research paper from the Global Carbon Project had disappointing news for the millions of people worried about climate change. This year, the authors warned, our carbon dioxide emissions hit a record high despite everything that is being done to arrest the rise in these emissions. 

The culprit: natural gas.

The data compiled by the GCP researchers revealed that natural gas has replaced coal as the biggest driver of carbon dioxide emissions growth in the last few years. It has also become, because of its abundance and low price, the biggest source of electricity generation in one of the biggest polluters, the United States.

“Natural gas may produce fewer carbon emissions than coal, but that just means you cook the planet a bit more slowly,” a research director with the Center for International Climate Research told The New York Times. “And that’s before even getting into the worries about methane leaks,” Glen Peters, who helped compile the data for the CGI report, added.

The Silver Lining

Carbon dioxide emission growth is slowing down and this is largely thanks to the reduction in coal use globally. This year, emissions from coal declined an estimated 0.9%, which while not a particularly large number is nevertheless a significant one because the decline was unexpected.

In Europe, coal use is falling dramatically. 

During the first half of 2019, according to Carbon Brief, it fell by an “unprecedented” 19% across the continent. In some European countries such as Italy, the UK, and Spain, coal now accounts for less than 10% of the energy mix.

Coal power plants are being retired in the U.S. as well, and coal production is falling.  Related: The One Sweet Spot That Continues To Drive Permian Growth

The Energy Information Administration reported this month that while lower-cost coal-fired plants will survive in the future as well, higher-cost ones will continue to be retired as they cannot compete with cheap gas-fired alternatives.

According to the authority, between 2019 and 2030, some 90 GW of coal generation capacity will be retired, most of it high-cost capacity. This year and next, coal power plants will account for 25% and 22% of the energy mix, respectively. Coal production, too, will fall this year by 8% because of this drop in demand in the power utility sector.

Meanwhile, however, China is still building coal power plants and so is India. 

As its economy began to slow down a couple of years ago, China, as Reuters reported recently, has become more willing to relinquish some of its climate goals in favour of cheap energy. Since the start of 2018, the country has built 429. GW of new coal capacity and another 121 GW under construction.

India is another major coal user although consumption has been slowing there. The reason for this, however, is not a concerted effort to reduce the use of coal, but rather the slowdown in economic growth.

Coal is the dirtiest fossil fuel. It is also the cheapest. In fact, it epitomizes the phrase “dirt cheap”. As such, it will not go away easily in developing economies that simply cannot afford to be too picky about the source of their energy when demand is rising fast.

By Irina Slav for Oilprice.com

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