coal storage

Early phase-out of coal could save billions, report finds

Countries including Australia and Indonesia could lose billions of dollars if they continue to invest in new coal mines and exports as the world moves away from fossil fuels, researchers have found.

An Imperial College London (ICL) team combined data on coal resources and demand in an economic model of trade and prices.

They modelled the risk of ‘stranded assets’ for coal investment under two different decarbonisation scenarios: business as usual, where investment in coal mining and consumption continues as it does today, and a sustainable pathway, where coal consumption is reduced in line with keeping global heating to well below 2°C.

Following the sustainable pathway - as countries have agreed to do under the Paris Agreement - results in a third of today’s coal mines becoming stranded assets by 2040. This means such assets become economically unviable before their operating lifetime ends and have to be scrapped.

This will cause coal-producing nations such as Australia and Indonesia to lose vital export revenue and jobs as their international trade shrinks. For example, Australia could lose $25bn (£18bn) per year in this scenario, with 2.2 million jobs potentially at risk globally.

A report last year found that the plunging cost of renewable electricity was already making fossil fuel plants increasingly uneconomical. Many developed nations, including the UK, have also instituted policies to phase out coal-fired power plants altogether.

The ICL team said that governments could prevent huge losses from the coal sector if they prepare for the change now. This could include divesting early from coal to prevent locking in future development and by funding the retraining of coal workers.

Lead researcher Dr Iain Staffell, from ICL’s centre for environmental policy, said: “This is not to say that all new coal investments - such as the deep mine planned in Cumbria - will be unprofitable, but investors must carefully assess the financial as well as reputational and environmental risks when pursuing new coal mining projects.”

China, Europe and India would save money under the sustainable pathway, as they face reduced costs from importing less coal, the study found. Europe, for example, could gain $20bn per year as coal is phased out.

“Businesses have a limited window of opportunity to get out in front of the sweeping changes that face the coal industry,” Staffell said. “We must build the human and financial resilience so that workers do not lose out and make the transition to a coal-free world easier.”

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