Vijay Jayaraj: Despite COP26 pressure, Asia and Africa remain committed to coal

With Asia and Africa defiant in their pursuit of coal while the US and Russia continue to feed the growing global appetite for coal, the end of coal is nowhere near. Instead, we might witness a renewed global demand for coal.

Russia aims to double coal exports to China

The head of the United Nation’s 2021 Climate Summit, Alok Sharma, has demanded that countries must abandon coal and the pathway for the same must be laid out at the Conference of Parties (COP) 26 meeting that is scheduled to happen at Glasgow in November this year.

Last month, Sharma said, “The days of coal providing the cheapest form of power are in the past. And in the past they must remain. The coal business is, as the UN secretary general [António Guterres] has said, going up in smoke. It’s old technology.” Sharma’s call for global coal-use ban echoes that of Joe Biden, Boris Johnson, and other anti-fossil administrations, all of whom are determined to unethically force developing countries into submitting to their anti-fossil policies.

Even the International Energy Agency (IEA), which is supposed to represent the energy needs of those who are in dire need of energy access, has aligned itself with the anti-fossil fuel party. In its recent report titled “Net Zero by 2050”, the IEA has asked for “investors to stop funding new oil, gas and coal projects beyond this year” in order to meet the goals of the Paris climate agreement.

However, the energy demand reality and the market scenario on ground indicates that these calls to abandon coal are nothing short of fantasy. Asia and Africa are showing no signs of reducing their coal appetite and are in fact on track to increase their coal dependency.

Asia’s energy superpowers determined to burn more coal

Surprisingly, the initial pushback to IEA’s call for fossil disinvestment came from Japan, a nation that recently promised to push back against coal. Reacting to IEA’s call for ban on coal funding, Japan stated, “The report provides one suggestion as to how the world can reduce greenhouse gas emissions to net zero by 2050, but it is not necessarily in line with the Japanese government’s policy.” Japan is the third largest consumer of fossil fuels in Asia. The Asian market is dominated by China and India.

China, especially, is the global leader in coal consumption. More than 25% of global carbon emissions is from China. Despite promising that it would achieve net-zero by 2060, Beijing continues to increase coal consumption and export of coal-technology.  Anti-coal campaigners say that China’s latest 5-year plan falls well short its tall claims to reduce coal consumption. “China’s five-year plan is underwhelming and shows little sign of a concerted switch away from a future coal lock-in,” said Swithin Lui, of NewClimate Institute.

China funds more than 70% of all new coal plants being built globally. It is reported that, “Nearly all of the 60 new coal plants planned across Eurasia, South America and Africa –70 gigawatts of coal power in all – are financed almost exclusively by Chinese banks.” Among the most recent of its coal investment is the $3 Billion coal plant in Zimbabwe. With its “Belt and Road initiative”, China is helping around 150 countries with fossil fuel production and coal technology. Beijing is unlikely to compromise on its Belt and Road Initiative, especially when most of the countries relying on its help are developing countries that desperately seek fossil fuel driven energy growth.

China’s neighbour India is the second largest coal consumer in the world. Unlike China, India’s coal investment outside its borders is very limited. Nevertheless, it is one of the largest coal markets in the world and is fully committed to increasing coal capacity, the fuel that supplies more than 70% of its annual electricity consumption each year.

Signs of a healthy coal demand are very visible in India, where the economy is looking to recover from the first and second wave of COVID-19.  Coal India Ltd (CIL), the state coal producer and the World’s largest coal miner, is expecting stock prices to rebound in 2021 after renewed demand from for coal intensive commodities such as steel, aluminium, cement and others. One of CIL’s arm has registered a growth of 112 percent in coal production (4.84 Million Tonnes) in April 2021.

In order to enhance coal production further, the country has allowed increased participation of private miners. Miners like EMIL, VFR and Adani - all have contributed to the increase in production. The Indian government is also in the process of selling mining rights and the second leg of auction process began in March this year, with 67 mines for sale. The Coal Ministry has now reported that there has been “tremendous response to second tranche of commercial coal mines auction.” It added that “more prospective bidders are in the process of registration and purchase of tender documents from the auction portal.”

Indian government officials have gone on record to reiterate the importance of coal to the country’s future energy prospects and continue to announce major investments to boost production. Coal ministry's additional secretary M Nagaraju said that India must make more coal-investment in “research and applications of AI and IoT for mining as these technologies will be cost-saving leading to more profits; high levels of productivity, improved quality and bring efficiency in the system.”

India has also defended its coal sector as “harmless” and that the impact from coal producers is insignificant in terms of the country’s emissions. Coal India Ltd accounted for only 0.65% of the country’s total carbon dioxide emissions of 2,616 million tonnes (MT) during the year 2019-20. In contrast to the usual narrative, CIL claims that it actually improves the country’s environment through planting trees. CIL has “planted around 78 lakh saplings with a survival rate of 85 per cent spread over 3,212 hectares, under afforestation programme.” CIL has so far planted over 40,000 hectares of saplings and aims to add another 10,000 hectares by 2030, some of which they believe will offset the emissions.

Emerging coal hubs in Africa

Like Asia, Africa too is expected to increase its dependency on coal and decrease it.

For Africa, coal is not an option, but a necessity. Energy access is the foundation of any economy and much of Africa is nowhere close to alleviating the rampant energy poverty in the continent. Homes in dark, hospitals without electricity for medical equipment, and industries struggling to get uninterrupted supply of electricity - the story remains the same in most of sub-saharan Africa. Fossil fuels are the only energy source that can bring immediate change to the energy scenario in Africa. Scientific American reported that, “more than 60 percent of Africans are without basic energy services and coal, oil and natural gas may be a necessary bridge.”

Sharma and Biden’s call to immediately end coal funding does not bode well with Africa.  Dmitry Bokarev, New Eastern Outlook, notes that the “development of coal power in Africa may cause protests from Western environmentalists, who haven’t experienced hunger, poverty, and lack of electricity for a long time.” He also points out that Africa’s upcoming coal plants should not be compared to the polluting old coal plants of the 20th century, “A number of coal technologies have already been developed and are being implemented under the HELE (high efficiency, low emission) principle. These technologies include so-called supercritical coal plants, coal gasification, and other methods that produce noticeably more electricity while burning the same or even less coal, resulting in less harmful emissions into the atmosphere.”

Even a reasonably developed African nation like South Africa needs undisrupted supply of coal. Coal accounts for 90% of South Africa’s energy and is set to remain South Africa's leading source of electricity in 2030. 19 of Africa’s 34 coal plants are in South Africa. The country has also seen increased fossil fuel trade with China. China is involved in the “construction of a complete energy and metallurgy industrial chain” at the Musina Makhado SEZ in South Africa. The unit will “include a coal washery, a coking plant, a ferrochrome plant, a ferromanganese plant, a high manganese steel plant, a stainless steel plant and a cement plant, alongside a coal-fired power plant.”

Leaders in Africa are likely to persist with coal in the coming decades. A recent study reported that around 1250 new coal and gas plants are being planned in Africa alone. The continent would count on the  abundant availability of coal, the cost of generation, the improvement in coal burning technologies, and the moral quotient of being the continent with the least per capita CO2 emitters. Emission from Africa accounts for only 1 - 1.5% of global greenhouse emissions. “Many plans for new coal-fired power plants have not even been implemented yet and even if they were realised, the impact on global climate change will not be noticeable,” says Stephen Karekezi, from Africa Energy Policy Research.

Despite the looming uncertainty surrounding fossil fuel funding from the West, the countries in Africa are upbeat about coal powered economies and the thirst for coal is already visible in countries like Botswana, Tanzania, and Mozambique. Even big banks continue to be indirect funders of coal projects. HSBC is now confirmed to be indirectly aiding the development of more than 70 new coal plants in Asian and African countries, including Bangladesh, China, India, Indonesia, Japan, Madagascar, Pakistan, the Philippines, South Africa, South Korea and Vietnam.

Resilient international coal trade

In the international coal market, the Australia-China episode of 2020 resulted in halt of Australian coal export to China and a subsequent shake up of import-export equations. Regardless, the coal trade continues in these two countries, thanks to international demand, especially from Asia and South Africa.

China now makes up for the lost Australian coal imports from countries like South Africa and Indonesia. South Africa started its coal export to China in December 2020, and has maintained an average export of 760,000 tonnes a month. Meanwhile, Australia has secured a significant coal export deal with India, which saw a 67% increase in the shipment of Australian coal to India. Increased exports to South Korea and Japan further minimized the negative impact of the loss of Chinese market.

The continued coal demand in Asia-Pacific countries has also kindled prospects of increase in exports from Russia and the U.S. During the past two decades Russia has registered a 2.9% increase in coal production and 9.6% increase in coal export. It is estimated that if Russia continues to produce coal at 440 million tonnes a year (the current rate), its coal reserves will last for the next 370 years. The reserves are the second largest in the world, next to those in the U.S. Despite claiming to be the climate saviour, the Biden administration exported around 9.4 million mt of U.S. thermal coal in the first quarter of 2021, “up from 7.5 million mt in the same period last year.”

With Asia and Africa defiant in their pursuit of coal, and the likes of US and Russia continuing to feed the growing global appetite for coal, the end of coal is nowhere near. Instead, we might witness a renewed global demand for coal as the new power plants go online and developing economies transition into developed ones. COP26, in spite of the media build-up and bold statements, will not usher in the end of coal.