November 2021
Thermal coal has been an important source of energy in most industrialised countries for several decades. Global reliance on this fossil fuel for electricity generation remains high. However, coal accounts for over 40% of global carbon emissions, with coal-fired power plants being the largest contributor to the rise in emissions in recent years.

Global climate goals have been attracting more public attention in the past decade. With coal being the most carbon-intensive fossil fuel, all scenarios that meet these climate goals feature a rapid decline in coal use. However, moving away from coal is not a simple task, especially as coal accounts for over 36% of the global power mix (2019). In order for the world to meet the objectives of the Paris Agreement, global coal use in electricity generation must fall to 80% below 2010 levels by 2030, all coal-fired power stations must be shut by 2040 at the latest, and global coal emissions should have peaked in 2020.

The coal phase-out in the power sector has two main aspects: managing the decline in emissions from current assets and stopping construction of new plants. Although the second task has proven to be easier than the first and several countries, like Canada, have completely stopped financing and approving new thermal coal projects, key producing countries such as Australia, India and China are resisting the global bid to phase out coal.

Although the European Union and 53 countries have pledged to achieve net zero emissions since the Paris Agreement in 2015, as of mid-2021, only 21 countries using unabated coal for electricity generation have committed to phasing it out. Among them, only Austria (2020), Belgium (2016) and Sweden (2020) have done so. Together, these commitments cover just 4.1% of global coal-fired generation and 1.3% of global energy-related CO₂ emissions. Only 14 out of the 21 countries that have pledged derive less than 10% of their electricity supply from coal.

In countries where coal contributes little to the power supply and there is no domestic coal industry, phasing out coal is likely to be achievable without damage to the economy, electricity prices or the security of the electricity supply. However, for countries with the highest use of coal, highest coal exports and highest planned coal capacity, such as Australia, Indonesia, Japan, South Korea, India, China and South Africa, phasing out coal remains an unattractive challenge.

G20 Actions to Phase Out Coal

In May 2021, climate ministers from G7 countries committed to further hasten the transition away from unabated coal capacity and decided to end the financing of coal-fired plants overseas. Canada, the UK, France, Germany and Italy already have coal phase-out plans in place. France, Italy and the UK will phase out coal-fired power generation by 2025, Canada by 2030 and Germany by 2038.

The US has seen its coal-fired power generation tumble because of competition from gas and renewables plants. Japan has the largest share of coal-fired generation in its mix and will be required to take the most action to accomplish the G7's goals. A total of 35.4GW of coal power capacity is located in countries which have announced they will phase out coal by 2030, placing the coal plants in these countries on a route to closure. This represents 21% of Europe’s currently operational coal fleet, 25% of which is in the EU. Although not aligned with the Paris Agreement, Germany’s phase-out target means a further 17GW of coal power capacity is set to close after 2030.

In 2015, the UK became the first country to officially commit to phasing out its coal operations. Originally planned for 2025, UK Prime Minister Boris Johnson launched a consultation last year to bring the deadline forward by a year. After the deadline, the country will restrict the emissions coal-fired plants are permitted to generate, forcing those without carbon capture technology to close. Over the past 10 years, coal has experienced a sharp decline in the country, with its contribution to national power generation falling by more than 80% since 2012.

Where are Carbon Emissions Coming From?

China and the US are by far the largest emitters of CO2 from coal consumption, accounting for nearly 60% of global CO2 emissions from coal, with India in a distant third place. Currently, the US depends on coal for nearly half of its power generation with coal accounting for approximately one-third of the total US emissions.

Similarly, China generates 80% of its electricity from coal, and in recent years, emissions from thermal coal use have increased five times faster in China than in the US. With enough coal reserves to meet current consumption levels for centuries, the US and the rest of the world face the challenge of reconciling the realities of coal use with the dangers posed by climate change.

As part of China’s efforts to reduce its greenhouse gas emissions, the country will start phasing out coal use from 2026. Last year, China pledged to bring its emissions to a peak before 2030 and achieve net-zero emissions by 2060. China’s announcement that it will cease to support the construction of new coal plants overseas could lead to the cancellation of up to 190GW of coal projects between now and 2050.

According to a policy draft approved in April by the country’s Ministry of Economy, Trade and Industry, Japan's coal-fired power generation will drop to 26% of its energy mix by the fiscal year 2031, down from 31% in fiscal 2020, as the country phases out its inefficient coal-fired power plants with regulatory measures. In July 2020, Japan had about 48GW of coal-fired power capacity over 150 units, with major power utilities owning roughly 39GW of the capacity over 70 units.

The Australian Federal Government has rejected calls to phase out coal after the top United Nations climate advisor urged Australia to transition away from fossil fuels. The country’s Federal Minister for Resources and Water has said coal will remain a significant contributor to the Australian economy well beyond 2030. The Prime Minister has recently committed Australia to reaching net-zero emissions. However, the country will rely on emerging technologies, such as carbon capture, storage and utilisation (CCSU), to meet this target.

If widely deployed, CCSU could possibly allow the world to continue to exploit its cheap and abundant supply of coal and to effectively deal with the danger of climate change. CCSU works by separating CO2 from other gases in the exhaust stream at power plants and industrial facilities, compressing the CO2 to pressures suitable for pipeline transport, and injecting it into deep geologic formations where it can be safely and indefinitely stored. However, this technology has only been used at a very small scale so far.