G7 countries, in an effort to stem the effects of climate change, agree to stop funding for coal power projects that emit carbon by the end of 2021
Wyoming’s hopes to export Powder River Basin (PRB) coal to other nations as coal demand declines in the U.S. were dealt a major blow on Friday.
After a two-day meeting, G7 ministers for climate and environment committed to phase out all government-sponsored funding for coal-related projects emitting carbon by the end of the year.
The G7, or Group of Seven, is an intergovernmental organization of major economies. Its membership includes Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. The group also includes representatives of the larger European Union.
In its communique, the G7 committed to build back better, putting “climate, biodiversity, and the environment at the heart of our COVID-19 recovery strategies and investments. […] We will help set the world on a nature positive and climate-resilient pathway to bend the curve of biodiversity loss by 2030 and to keep a limit of 1.5°C temperature rise within reach by making our 2030 ambitions consistent with the aim of achieving net zero emissions as soon as possible and by 2050 at the latest.”
Wyoming and the thermal coal industry long considered exporting coal to Asia, the industry’s one remaining bright spot. On a cost per ton basis, the export coal market generates higher returns than coal sold in the U.S., but it has been hampered by high transport costs and regulatory decisions by states on the west coast.
1.5 degrees
The Paris Agreement under the United Nations Framework Convention on Climate Change sought to limit the increase in global average temperature to 2.0°C by 2050. However, based upon a special report from the Intergovernmental Panel on Climate Change (IPCC), many environmentalists and the G7 have been focusing on 1.5°C as the threshold to avoid the worst climate change impacts.
While eliminating financing for coal projects, the group committed $100 billion per year each year through 2025, for “climate mitigation and adaptation actions.” The communique also called upon other governmental organizations and the private sector to align their funding decisions with the Paris Agreement.
Coal is out
The communique and G7 take a strong position against coal for power generation.
Last week #G7 Climate & Environment Ministers agreed major action to tackle climate change:
???? protect of 30% of the world’s land & ocean by 2030
????end all new finance for coal power by the end of 2021
????increase the quantity of finance for climate actionhttps://t.co/ppvvjT4hRp— G7 UK (@G7) May 24, 2021
The Powering Past Coal Alliance (PPCA), whose membership includes 36 countries, of which the U.S. is not a member, are specifically acknowledged within the communique. Though the U.S. is not a member of the organization, several U.S. states and municipalities have joined the group.
According to the PPCA website, the organization aims to “secure commitments from governments and the private sector to phase out existing unabated coal power; encourage a global moratorium on the construction of new unabated coal-fired power plants; shift investment from coal to clean energy, including by working to restrict financing for coal-fired projects; [and] achieve coal phase-out in a sustainable and economically inclusive way, including appropriate support for workers and communities.”
The G7 communique seems to move forward a number of the PPCA’s goals.
Contrary to the goals of Wyoming, the G7 communique includes only limited support for carbon capture utilization and storage (CCUS) technologies, listing it only as an option towards achieving net-zero emissions for decarbonizing some “hard-to-abate industrial sectors such as iron and steel, cement, chemicals, and petrochemicals.”
CCUS has been a frequent topic of discussion in Wyoming, with both support from Governors Matt Mead and Mark Gordon and the legislature to develop and deploy CCUS technologies (WyoFile reposted on County 17, May 10). The University of Wyoming has been involved in studies regarding the feasibility of carbon capture and storage (CCS) through the CarbonSafe project at the Dry Fork Station power plant in Gillette (County 17, Mar. 18).
In order to achieve the G7’s goals, the communique focuses investment on energy efficiency, renewable energy, and energy storage.
Curbing construction in developing economies considered key
Eliminating financing and funding for coal-fired power plants will make the continued construction of new plants very difficult for nations with developing economies. As many nations work to bring their populations out of energy poverty, fossil-fuel based electricity generation is often the most cost-effective and most-reliable option. The countries with developing economies lack both the capital and grid-reliability to deploy wide-spread renewable energy and the technology for cost-effective grid-scale storage could still be years, or even decades, out.
Though much focus has been placed on CCUS and CCS by Wyoming, the technology is still largely unproven at the commercial scale and is both costly to implement and to operate. Lower natural gas prices have prompted many operators within the U.S. to simply retire aging or uneconomical power plants to reduce carbon emissions and save rate-payers money as natural gas continues to be at generational price lows with no expectation of major price increases in the foreseeable future.
Almost all new coal-fired power plants are being constructed in the developing world, with China leading the way. According to reporting by Reuters, even when factoring in decommissions, China’s coal-fired capacity rose by 29.8 gigawatts (GW) in 2020. During the same year, 17.2 GW of coal-fired capacity was retired throughout the rest of the world.
According to reporting in YaleEnvironment360, 58% of China’s total consumed energy came from coal and China accounted for 28% of total CO2 emissions in 2020. China also has 247 GW of coal-fired capacity in planning or development, meaning that the nation is by far the largest economy investing in coal. China has indicated its emissions will peak by 2030.
The G7 communique draws attention to the importance of shifting “away from high-carbon power generation to support the clean energy transition in developing countries.”
By blocking access to capital, many nations will be unable to build new coal-fired power plants. Those who still do move forward will likely be forced to look at other fuels given the high costs of CCUS and CCS or seek funding from China, who has been more active in financial markets in recent years.
According to reporting by The Guardian, Japan, who is a G7 member, held out until the end of the two-day summit last week, arguing that if it stopped providing funding for coal-fired plants, developing economies would simply turn to China, whose designs are less efficient than those of Japan. In the end, however, Japan’s representatives agreed to the terms outlined in the communique.
Wyoming’s response
Despite Wyoming’s reliance upon coal for revenue and jobs, to date only Representative Liz Cheney (WY) has spoken out against the G7 decision. In a tweet earlier today, Cheney said, “Refusing to fund coal projects will have devastating effects for Wyoming,” and mentioned technology as a solution.
Refusing to fund coal projects will have devastating effects for Wyoming. Technological innovations, like carbon capture, will help us to safely, efficiently, and cleanly continue to take advantage of coal as an affordable and reliable power source. https://t.co/yfprg52B4a
— Rep. Liz Cheney (@RepLizCheney) May 27, 2021
An industry in decline
In the U.S., coal’s decline from the dominant source of generated electricity has been swift.
For the year 2020, reporting from the Energy Information Administration (EIA) shows coal having produced 19% of total U.S. electricity, having largely been replaced by natural gas, which provided 40% of U.S. electricity. This is a reversal of roles, as coal for decades provided 40% or more of electricity generated in the U.S.
In the year 2011, EIA data shows coal providing 42% of U.S. electricity. The total gigawatts of power generated from coal has declined over the same period, from 1,733,430 GW in 2011 to 773,805 GW in 2020 (EIA report). Similarly, in 2011 coal consumed for electrical generation in the U.S. totaled 934,938 thousand short tons, compared to 436,076 in 2020 (EIA report).