IMF warns concerted action needed to reduce coal emissions

The International Monetary Fund (IMF) has said a move away from coal to a more sustainable economy will need a concerted effort by governments to mitigate the barriers that currently exist.

In an article on the IMF’s website the organisation said action needed to be taken as the consumption of coal is expected to recover from its sharp decline during the pandemic.

It warned that a move away from coal power and usage would need to come with steps to protect the communities that heavily rely on the industry for employment. It will also need to put in place financial and technical support for emerging economies that use coal to power their energy needs.

The IMF also warn that a move away from coal will not be a short-term operation as the drive for sustainable alternative continues.

“Demand for coal remains strong and helps to fuel economic development in emerging markets,” it said. “Yet many countries, seeking a more sustainable future, have been taking steps to reduce their dependence on fossil fuels, especially coal. Obstacles to their efforts have proven difficult to overcome, not least because people who work in the coal industry depend on it for their livelihoods—but the right policy levers can help.”

Coal accounts for 44 percent of global CO2 emissions. When burned to generate heat or electricity, coal is 2.2 times as carbon intense as natural gas—that is, burning coal emits more than twice as much carbon dioxide as natural gas to generate the same amount of energy.

Coal-fired thermal power plants release sulphur dioxide, nitrogen oxide, particulate matter, and mercury into the air and rivers, streams, and lakes.

“These emissions not only degrade the environment but there is long-established evidence they are hazardous to human health, British government medical reports estimated that 4,000 people died as a direct result of the Great Smog of London in 1952 that was caused by coal combustion and diesel exhaust,” added the article.

The IMF said there remains a strong relationship between the level of development and coal consumption, with middle-income countries typically being most dependent on coal. During the second industrial revolution in the late nineteenth and early twentieth centuries, advanced economies rapidly increased their dependence on coal. As incomes continued to rise, however, coal was slowly replaced with more efficient, convenient, and less polluting fuels such as oil, nuclear energy, natural gas, and, more recently, renewable energy.

“Today, emerging markets account for 76.8 percent of global coal consumption, with China contributing about half,” it added. “Power generation accounts for 72.8 percent of coal usage, and industrial uses, such as coking coal for steel production, represent another 21.6 percent.”

It warned the phaseout from coal often take decades. It took the United Kingdom 46 years to reduce coal consumption by 90 percent from its peak in the 1970s. Across a range of countries, coal use declined just 2.3 percent annually during the period 1971–2017.

“At that rate, it would take 43 years to fully phase out coal, starting from the peak consumption year,” said the IMF.

There were numerous barriers to the ability of countries to phase out coal consumption at any significant level in the short term.

The industrial use of coal, concentrated in emerging markets, is hard to replace with other energy sources. Hydrogen-based technologies offer a pathway to green the production of steel, but incentives are currently weak because of insufficient carbon pricing.

Coal power plants are long-lived assets with a minimum design lifespan of 30 to 40 years. Once built, coal plants are here to stay unless there are dramatic changes in the costs of renewables or policy makers intervene.

There is also the human cost. A move away from coal typically means losses for the domestic mining industry and its workers. In major coal-consumer countries such as China and India, strong domestic mining interests may complicate and delay the phase-out of coal. In the United States, the rapid transition from coal to natural gas led to a decline in coal mine employment, a record number of bankruptcies among coal mining firms, and a sharp decline in coal mining stocks.

“A similar transition in some coal-producing countries could imperil financial stability, as banks take losses on investments in obsolete mines and power plants—so-called ‘stranded assets’,” warned the report. “And the human element often sees a long, proud tradition of miners and others working in the industry, which makes abandoning this way of life difficult.”

The IMF said there needed to be stricter environmental policies, carbon taxes, and affordable energy substitutes if any real progress was to be achieved.

“Tough questions will need to be asked and answered when considering the policy alternatives supporting a shift away from coal,” said the IMF. “Coal miners and others who depend on the coal industry for their livelihoods need, and deserve, realistic solutions to the potential disruption they face.

“Other supportive policies will be needed to ease job transitions, and possibly encourage the development of alternative industries to avoid hollowing out communities and upending families. In the case of emerging markets and low-income countries, the international community can provide financial and technical assistance (e.g., the know-how needed to build grids that work with intermittent power sources, such as wind and solar) and limit financing of new coal plants, at least where alternatives exist.”

Demand for coal remains strong and helps to fuel economic development in emerging markets, yet many countries, seeking a more sustainable future, have been taking steps to reduce their dependence on fossil fuels, especially coal.

International Monetary Fund