The future of coal in a carbon-constrained world
By Rey Edward, sustainable finance coordinator, and Marissa Knodel, climate change campaigner
January 2016 marked a historic moment for the future of coal in the U.S. and China. The Obama administration announced a moratorium on new and pending coal leases until the federal government examines the impacts the federal coal leasing program has on the environment, including climate change. China announced it would stop approving the construction of new coal mines and close more than 1,000 coal mines, sequestering 50 million tons of coal.
What do these moves mean for the future of the coal industry as nations act to reduce emissions in a carbon-constrained world?
U.S.: Reforming the federal coal leasing program
It’s been 35 years since the last comprehensive environmental review of the federal coal-leasing program, in which global warming and climate change were not mentioned. The federal government manages 309 coal leases across 10 states and contributes about 14 percent of total annual U.S. greenhouse gas emissions. The combustion of publicly owned coal accounts for more than 57 percent of all emissions from fossil fuel production on federal lands. Under President Obama’s watch, 2.2 billion tons of publicly owned coal have been leased to coal companies for about $1 per ton, releasing 3.9 billion metric tons of carbon pollution.
Full consideration of the climate impacts from future federal coal production is essential to meeting national and international climate commitments. At least 80 percent of global coal reserves and 90 percent of U.S. coal reserves must remain in the ground to have a 50 percent chance of avoiding catastrophic levels of global warming. With the moratorium in place, 1.8 billion tons of coal that could produce 3.4 billion tons of carbon will be kept in the ground.
China: Stopping new coal mines
China is a carbon behemoth, responsible for over one-quarter of the world’s carbon emissions in 2014, more than the U.S. and the European Union combined. Yet China is also emerging as a global leader when it comes to creating green financial policies which curb carbon emissions and pollution. In response to China’s environmental health crisis, the central government has created stricter environmental and industrial regulations and policies for coal production. At the same time, China has strongly fostered the growth of the renewable energy sector and is now one of the leading investors and manufacturers of wind and solar technologies.
In November 2014, the Chinese government announced plans to peak carbon emissions around 2030 and increase its share of non-fossil fuel energy to 15 percent by 2020 and 20 percent by 2030. China’s coal consumption has been falling since 2013, and coal imports dropped by 30 percent in 2015. These trends led to a decrease of 200 million tons of carbon in 2015 while economic growth continued.
But Chinese leadership on limiting coal production and carbon emissions seems limited to its borders. Despite policies aimed to curb lending to the coal sector and other highly energy-intensive and polluting industries, Chinese banks remain by far the biggest financiers of coal mining and coal power around the world. All of the top ten global coal mining financiers are from China, and six of the world’s biggest financiers of coal power are from China. In fact, although China was widely praised for its ambitious emissions targets at COP21 in Paris, its simultaneous financing of dirty coal plants overseas may ultimately “undercut” any reductions made domestically.
Keeping coal in the ground
Now that the two largest coal producing nations have pledged to reduce carbon emissions and both have now taken serious steps to halt new coal development, the challenge will be holding them to their pledges and building upon this progress.
In the U.S., President Obama needs to similarly review the climate impacts of the federal oil and gas leasing program and place a moratorium on new and pending leases, including not offering new ones for offshore drilling. In China, financial institutions should curb lending to polluting industries like coal mines and power plants among their overseas investments.
Climate leadership from the U.S. and China is critical to meet the global threat posed by climate disruption, but meaningful progress to reduce emissions to below catastrophic levels will not occur until nations stop them at their source. If China and the U.S. are to truly fulfill their commitment to sustainable development, both will need to keep fossil fuels in the ground.
Learn more about the U.S. federal coal moratorium here.
Learn more about China’s sustainable finance policies here and here.
