Lessons from previous ‘coal transitions’ high-level summary for decision-makers
|Lessons from previous ‘coal transitions’ high-level summary for decision-makers||989.1 KB|
The stabilisation of the climate system in line with the Paris Agreement on climate change is impossible without the timely phase out of unabated coal from the global energy system. Coal currently accounts for 29 percent of global primary energy supply and generates 44 percent of global CO2 emissions (Center for Climate and Energy Solutions n.d.). Carbon capture and storage technologies notwithstanding, this transition implies a substantial reduction in global coal demand (Allen et al., 2014).
Phasing down the use of coal is also increasing looking feasible and politically desirable in large parts of the world. Alternative energy sources, such as onshore and offshore wind and solar photovoltaics (PV), are constantly improving in terms of cost competitiveness with coal in many locations (Randall 2015; Liebreich 2015). These alternatives also have important co-benefits, such as producing much less local air pollution that impacts human health (Health and Environment Alliance 2013), and using significantly less water (Rodriguez et al., 2013; Greenpeace Energydesk 2016). Improvements in the cost of energy storage and other approaches to managing intermittency–a common retort to the possibility of significant fossil fuel phase out–have also gathered pace.
A phase down of coal use in line with global climate objectives will require major adjustments on the supply side of local and global coal markets. In an uncertain world, it also has to be acknowledged that the adjustments to the supply side of global coal markets could come faster and less smoothly than workers, companies and regions currently expect. If recent experience of global energy markets–whether for electricity, oil, gas, nuclear or renewables–has taught us anything, it is that “structural breaks” in the market environment often occur faster and can be more disruptive than key actors think is possible until they actually occur. This is also a lesson from the case studies summarised in this paper: the economics of coal mine closure can move quickly, often leading actors to try to catch up to the unfolding reality, rather than piloting their own future. When this occurs, the results are often much more severe for companies, workers and regional communities. Getting ahead of economic realities is crucial.
Moreover, the global nature of coal markets means that local coal mining activities in specific parts of the world can also be strongly affected by international developments that occur beyond national borders or the control of national governments. Likewise, the opposite holds true: domestic national or regional developments, particularly those in major coal consumers, can have significant impacts on global markets and hence on exporting regions. Thus, there is strong argument for anticipation of coal sector transition.
However, these adjustments come with important challenges and risks. Most immediately, these challenges and risks are borne by workers, companies, and regions, each of whom currently depends on the economic activity generated by coal mining in different ways. Workers face risks related to finding desirable reemployment or, for some, managing their exit from the labour force; companies face reputational, financial and strategic risks; while regions will often have to adjust to the loss of a significant share of their local economic activity in local communities. Indeed, some of these risks have already begun to be felt in specific contexts, such as in China, Europe and the US, where the plight of coal companies, regions and workers has become an important pre-occupation of governments (Wood Mackenzie 2016; Krukowska 2016).
The way that these risks are managed is vital to ensuring the best possible outcomes for these actors and the people who stand to be affected indirectly. Given the importance of the issues at stake to specific stakeholders, it is imperative that they are addressed fairly and effectively. Moreover, from a political perspective, these local challenges, if not addressed well, can also take on a global dimension: most obviously they can also have potential feedback effects on the willingness of populations and their governments to undertake necessary action to phase down the use of unabated coal (Caldecott et al., 2016; Caldecott et al., 2017) and pursue climate policy more broadly.
These considerations have led to the acknowledgement of the need for a so-called “just transition” away from carbon intensive activities, such as coal production and use. But what might a just transition look like in practice? What specific risks need to be managed and what are the best approaches to managing them? There is an urgent need to develop a deeper understanding of these issues. It is to this need that this report tries to respond. It provides a summary of lessons from six historical case studies of regional coal mining transitions that have occurred or are ongoing in Europe and the United States in recent decades