Nov 05, 2020
“How to retire early” was the intriguing title of the first webinar from a coalition of governments, businesses and organisations called the Powering Past Coal Alliance. You would be forgiven for thinking this was a discussion on wealth management or personal pension plans, but attendees were trying to answer a bigger and more important question: how best can governments and business phase out coal and replace it with cheaper renewable energy?
The webinar in mid-October brought together 130 people, including representatives of governments and public finance institutions. The principal speakers were Francis Pigeon from the Canadian Government; Danish Climate Ambassador Tomas Anker Christensen; Paul Bodnar, Managing Director of the Rocky Mountain Institute; and Grové Steyn, Managing Director of Meridian Economics, and Ed Webber of the UK Government. Alongside them was Mafalda Duarte, Head of the Climate Investment Funds (CIF).
Coal doesn’t just pollute: it also doesn’t pay
The science is clear: burning coal pollutes the environment, while clean energy is climate-friendly. Transitioning from the former to the latter is the right thing to do for the future of our planet. But unfortunately, history shows that this argument is not enough to encourage that transition with enough speed or at sufficient scale to meet global climate goals.
The participants in this webinar took a different approach to persuading those who still use coal: replacing uncompetitive coal with cheaper clean energy is financially beneficial. The cost of renewables is falling every year, and it is already cheaper to build new renewable energy generation than it is to continue operating 39% of the world’s existing coal capacity. By 2025, it is predicted that 73% of coal plants will be uncompetitive.
Moreover, in a new report, the International Energy Agency (IEA) says solar is now the cheapest form of electricity for utility companies to build. That’s thanks to risk-reducing financial policies around the world, the agency says, and it applies to locations with both the most favorable policies and the easiest access to financing. So the case for making the transition is very convincing.
Phasing out coal must not disadvantage workers
The CIF’s experience has a lot to offer in supporting this transition. Duarte shared suggestions for various financial tools to accelerate the phasing out of coal in different regions. She said these tools must be available to everyone: “While developed countries are already acting, with large-scale resources dedicated to this priority from the EU, there is an even greater need to provide developing countries with similar access to resources.”
After Duarte spoke, Paul Bodnar of the Rocky Mountain Institute presented an analysis by the Institute of the collapsing competitiveness of coal and a three-step plan for how governments can move more quickly to renewables. This includes refinancing coal assets to fund the transition and reinvesting parts of the new capital in clean energy.
Duarte and Bodnar agreed that while making the transition is of vital importance, measures must be put in place to ensure a just transition takes place. “Millions of coal workers have lost their jobs in recent decades and this hurts their communities,” says Mafalda. Large job losses happened during the transition away from coal in Europe, the United States and China, with more expected to follow in coal-producing countries in Asia.
As the renewable sector offers the potential to generate even more economic growth than coal, it should be possible to mitigate the effects of the transition and turn them to citizens’ advantage in the future. “It is essential to proactively manage this transition well and ensure the fair distribution of new opportunities in the green economy,” Duarte explained.
More speed required
The PPCA webinar offered reasons for optimism that governments and companies are moving away from coal towards renewables. On the evidence of the attendance of government representatives at the webinar, this trend is increasing. But change is not happening quickly enough. To meet the Paris Agreement’s objective to hold the rise in global temperatures to 1.5 degrees, coal generation must fall by 13% a year, according to a report from Ember. Even the record decline in coal generation during the pandemic has not matched the pace of change required.
The CIF is committed to using concessional financing to incentivise this transition. It will also continue to spread the word that coal has lost its economic advantage and the future lies in renewables. “We will not be anywhere near where we should be of meeting our goals with the current and planned capacity of coal-based generation,” warned Mafalda. “We must accelerate!”
You can watch the webinar in full here.
