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The Future Role Of Coal: International Market Realities Vs Climate Protection?

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Frank Umbach, The European Centre for Energy and Resource Security (EUCERS), King's College London

The use of coal for energy generation is currently subject to growing criticism in light of international climate protection efforts. Nevertheless, globally coal as a raw material is inexpensive and available in the long term, and it will also be used in the future in many ways.

Despite coal’s crucial importance for global – and European – energy supply, both demands for a German and European coal phase-out, as well as announced bans and restrictions on export credit support for clean coal technologies remain part of different climate protection programs. In this context, it is worth exploring to what extent regional or national policy provisions and energy policy preferences are conducive to a realistic and sustainable climate protection policy at the global level, considering that:

* On the one hand, a coal-free and independent world is unthinkable in the medium-term, as the use of this resource will grow globally – and particularly in Asia – through 2040.

* On the other hand, there exists a global need for modernising already existing or planned coal power stations in order to increase their efficiency and reduce their emission of greenhouse gases, which would contribute significantly to global climate protection efforts.

Against this background, countries inside and outside the EU should not regard renewable energy and coalfired power stations as mutually exclusive factors. On the contrary, renewable energy sources and coal should both be part of a pragmatic and more realistic energy strategy, given that it is pivotal to reconcile the world’s growing energy needs and supply security with climate change mitigation goals.

The following analysis will examine the strategic implications of different restrictions on and bans of export credit finance for coal power station and clean coal technologies, including whether such an export ban may prove counterproductive to global, German, and EU climate protection efforts. In addition, it will examine the overall question of whether coal has a future in the German and European energy mix in the medium-term – i.e. through 2040.

Based on this analysis, the study will shed light on the global, European and German energy policy dimensions in the context of the energy triangle – or ‘trilemma’ – and its three objectives: strengthening (a) energy (supply) security, (b) economic competitiveness, and (c) environmental protection. […]

Global Dimensions of Coal as a Key Energy Resource

Plans for building new coal plants – around 1,200 in 50 countries, with 75 per cent of those in China and India alone – are not in line with the 2°C target, and they instead highlight the need for CCTs, including CCS.

The new plants would join the current 2,300 operating worldwide and bring the world’s coal-fired power capacity up to 1,400 GW – the equivalent of another China as the world’s biggest emitter.

Coal is, after oil, still the second most important energy resource in the world for energy consumption. It has longer availability than conventional gas and oil resources, is cost-competitive, widespread, and plentiful. Hard coal, together with lignite, accounts for not less than about 55 per cent of all fossil energy resources. Moreover, it is used to make steel, cement, fertilisers, and as feedstock for the chemical industry.

Continuing a 20-year trend, growth in coal-fired generation since 2010 has been greater than that of all non-fossil-fuel sources combined. The share of fossil fuels in the total primary energy mix will only slowly decrease from 82 per cent in 2012 to 60-80 per cent by 2040. At 30.1 per cent, coal’s share in the global primary energy consumption in 2013 reached its highest level since 1970.

The proved global coal reserves in 2013 are sufficient to meet 113 years of global production, and thus far more than the ratio of reserves versus production (R/P) for oil and natural gas – 53.3 and 55.1 years, respectively. Yet coal reserves have been halved during the last decade.

At the same time, coal resources are 20 times larger than coal reserves and could be exploited with slightly higher prices and/or future technological innovations.

According to the International Energy Agency (IEA), coal will rival oil as the world’s top energy source as early as 2017. Global coal consumption is expected to grow by another 15 per cent through 2040. Its share of global energy demand will decline from 29 per cent in 2012 to 24 per cent by 2040, but will still remain the world’s second most important energy source just ahead of natural gas. Yet a world without coal is unrealistic even beyond 2040, and new production and transformation technologies – e.g. liquefaction and and gasification – are expected and already underway.

Full paper