Witnessing the "Last Coughs" of a Dying Coal Industry in Warsaw?
Reason's science correspondent sends a first dispatch from the U.N. Climate Change Conference
Warsaw—The second week of the 19th Conference of the Parties (COP-19) to the United Nations Framework Convention on Climate Change (UNFCCC) kicked off Monday. The goal of the meeting of 10,000 or participants is to establish a pathway toward wringing firm commitments out of the 195 signatory countries to cut their greenhouse gas emissions, chiefly carbon dioxide, by the COP-21 meeting in Paris in 2015. The climate treaty is intended to limit the increase in the mean global temperature to no more than two degrees centigrade above the pre-industrial average. During the first day at the conference, the future of coal was on the chopping block.
The first press briefing I attended, by the non-governmental organization Germanwatch, seemed uncharacteristically hopeful. The group issued its annual Climate Change Performance Index which ranks 58 countries relative to one another on how well Germanwatch analysts think each country is doing with respect climate change emissions and policies. For what it's worth, Denmark, Britain, Portugal, Sweden, and Switzerland, in that order, rank at the top as most climate-friendly, whereas Saudi Arabia, Kazakhstan, Iran, Canada, and Australia ascend in that order from the bottom of the rankings. President Barack Obama, whose Environmental Protection Agency has placed strict limits on the emissions of new coal-fired electric generation plants and has ordered that American cars double their miles per gallon from 27 to 54 by 2025, will surely be disappointed to learn that the U.S. standing as number 43 on the list did not change.
Germanwatch's Christoph Bals began by analyzing carbon dioxide emissions trends over the past decade. First, the bad news—the world is emitted about seven gigatons more carbon dioxide annually than it did ten years ago. Some 80 percent of that emissions increase came from a rapidly growing China. The remainder of the rise came from other developing countries. The emissions from developed countries did not increase overall during that period. In other words, carbon dioxide emissions from rich developed countries may have peaked in the last decade.
Now for what Bals regarded as the good news—China is rapidly increasing its carbon intensity, that is, the country is steadily cutting the amount of carbon dioxide it emits per unit of GDP. As a result of these trends, Bals and his Germanwatch colleagues believe that it may be possible to see overall carbon dioxide emissions reaching a plateau around 2020.
At the following Climate Action Network briefing, the tone was considerably angrier and more pessimistic. Bert Metz from the European Climate Foundation released a joint statement, "New Unabated Coal is Not Compatible with Keeping Global Warming Below 2° C," from 27 scientists arguing most of the world's coal must stay underground. By "unabated," the scientists mean that the carbon dioxide ends up in the atmosphere rather than being captured and injected underground. The group has calculated that world can emit only about 1,000 gigatons more carbon dioxide in order to stay below the 2° temperature limit, yet burning all of the world's known reserves of fossil fuels would result in the emission of nearly 4,000 gigatons of carbon dioxide. The group asserts that their calculations mean that carbon dioxide emissions from coal must be reduced by 80 to 96 percent by 2050.
As luck would have it, the coal industry is holding its International Coal and Climate Summit in Warsaw right now. The coal moguls gamely invited Christiana Figueres, the head of the UNFCCC to give a keynote and she didn't offer them much love. "The coal industry has the opportunity to be part of the worldwide climate solution by responding proactively to the current paradigm shift," declared Figueres. Proactive responses she suggested include closing all subcritical coal-fired power plants, installing carbon capture and sequestration on all new plants, and leaving most existing coal reserves in the ground.
The majority (one estimate is 70 percent) of the world's coal-fired plants are subcritical, that is, they operate at relatively low pressure and efficiency. Carbon capture and sequestration would likely raise the cost of electricity by 40 to 60 percent. Since coal companies must leave most of their reserves unburned, Figueres suggested that they instead invest in renewables. Basically, she invited coal companies to go out of business. Meanwhile, Greenpeace, Friends of the Earth, 350.org, and other green groups enjoyed themselves with protests outside the coal summit. Back at the COP-19, the activists held a "kick coal out of the climate talks" rally.
Back at the COP-19, the activists issued the People's Statement on Coal and they, too, didn't have anything nice to say about the fossil fuel. The People demanded a ban on all new coal projects, an end to all public financing of coal projects, and instead want governments to mobilize "public finance to make a just transition to democratic, renewable and clean energy systems for people and communities as fast as possible." And one more demand: "Stop excessive energy consumption by corporations and elites."
Robert Chimambo, a representative of the Pan-Africa Climate Justice Network complained that Africans had done nothing to cause the problem of climate change, yet Africans are dying from the effects of climate change that have resulted from burning coal. Since only 24 percent of sub-Saharan Africans have access to electricity, one does wonder if it might be that more Africans are dying due to a lack of electricity than from climate change.
Also at the COP-19, a World Wildlife Fund panel piled onto the coal industry. "We're looking at the end of the age of coal," declared Samantha Smith, leader of WWF's Global Climate & Energy Initiative. "We are seeing the last coughs of a dying set of companies." David Nussbaum, the CEO of the U.K. branch of the WWF, agreed with Smith. Nussbaum further suggested that equity markets are confused when it comes to coal and climate change.
On the one hand, he asserted, market valuations of fossil fuel companies assume that all their reserves will be extracted and burned. On the other hand, the market valuations of other stocks assume that the planet is not going to heat up; assume no climate disruption from burning fossil fuels. This is a big contradiction that Nussbaum claimed will threaten future financial instability on the scale the 2008 crisis. Consequently, Nussbaum offered free investment advice to pension funds and universities: Prevent future losses on the fossil fuels portion of their portfolios by divesting themselves of those stocks as quickly as possible. I suppose that it is possible that Nussbaum knows more about stock market valuations than do tens of thousands of investors.
In any case, as evidence of coal's imminent demise, Smith cited the Goldman Sachs report, "The window for thermal coal investment is closing." Why? Because of increased environmental regulations, greater competition from natural gas and renewable energy, and improvements in energy efficiency. Oddly, Goldman Sachs purchased a coal mining company in Colombia last year and holds a stake in India's biggest coal company. In addition, its analysts recently upgraded several U.S. coal company stocks. Interestingly, Warren Buffet seems to be bullish on at least one fossil fuel company, buying a $3.7 billion stake in ExxonMobil last week.
Finally, at his first press conference in Warsaw on Monday, U.S. chief climate negotiator Todd Stern cited the Obama administration's proposed "carbon pollution" regulations on new power plant emissions as evidence that the country was moving away from coal. Stern also noted that, going forward, the world would tilt more toward renewables and improvements in energy efficiency, but that burning coal using carbon capture and sequestration might have some role.
Perhaps declaring the death of coal is a bit premature. In its 2013 report on international energy trends, the Energy Information Administration projects that world coal production will increase from eight billion short tons in 2010 to 11.5 billion short tons in 2040. That being said, coal consumption trends are mainly dependent on the political and economic decisions of the Politburo in China. For example, the Chinese government has just proposed capping coal consumption as a way to begin trying to control its apocalyptic levels of air pollution.
On the second day, depending on the news, I may take a look at the demands by developing countries that the U.N. establish a system for compensating them for the "loss and damage" from weather extremes driven by climate change. Of course, the developed countries that ruined the weather must pay the compensation.