In April of this year, electricity generation from renewable resources surpassed coal in the United States for the first time ever. For years, the global coal industry has been declining due to lower natural gas costs and greenhouse gas regulations. In Europe, coal usage has dropped drastically since the 1990’s; France has chosen nuclear energy as an alternative, accounting for 40 percent of its energy production, while Scandinavian countries have invested in wind and solar power. This January, federal and state leaders in Germany agreed to close all 84 coal plants in the country by 2038. Growing public concern and frustration regarding climate change and pollution has resulted in governments taking action to curb emissions throughout the West.
Asia, home to half the world’s population, is moving in the opposite direction, digging and burning three fourths of the world’s coal. Southeast Asia’s demand for coal is growing at the fastest rate in the world, driven by strong economic growth, a burgeoning middle class, and exponential population growth. Indonesia, home to the region’s largest economy, has been digging up more coal to fuel China’s energy needs. The two countries recently signed a new trade deal, allowing for Indonesian companies to expand further into China. Additionally, another Asian country, Vietnam, is ground-zero for foreign companies to invest in new power plants. Just this year, South Korean and Japanese banks have invested several billion dollars into coal-fired power plants in Vietnam. $150 billion is expected to be invested over the coming decade to meet demands for the projected population and economic growth. Vietnam’s coal usage from 2012-2017 increased by 75 percent, faster than any other country in the world, according to a research paper by Harvard. The country’s energy sector is projected to surpass Britain’s in the mid 2020s.
China is the world’s coal juggernaut, accounting for around half of global consumption. The government has pursued an ambitious initiative to reduce emissions domestically, but has recently cut back on its efforts to reduce carbon emissions and invest in renewable energy. The energy-demanding steel, cement, and chemical industries remain the drivers of economic growth in China, making reductions in coal usage less likely. As a part of the country’s Belt and Road Initiative, Chinese companies are investing and seeking projects in foreign nations. China is currently building or planning to build upwards of 300 coal plants around the world in places such as Turkey, Vietnam, Indonesia, Bangladesh, Egypt and the Philippines. China's financial institutions are providing $36 billion to fund this project, according to the Institute for Energy Economics and Financial Analysis. In March, the largest power producers in China asked the government to allow for the development of 300-500 new coal power plants by 2030 in a move that could single handedly jeopardize global climate change targets. The proposal would enable China to build two coal power plants a month for the next 12 years. This would grow the country’s coal capacity to nearly twice the size of Europe’s. This would destroy any chance of keeping global warming below 1.5 degrees Celsius. While the Chinese government has not adopted the industry proposal, it is under consideration.
India, home to seven of the world’s top ten most air-polluted cities, is the second largest consumer of coal in the world. India’s consumption has been increasing consistently for the past decade, and is expected to be the country’s primary fuel source through 2030 and beyond. While the Indian government is aiming to quadruple its renewable energy development capacity by 2022, like China, it also has a large stake in the coal industry. Coal India Limited (CIL) is the world’s largest coal mining company, still providing about 85 percent of India’s domestic production of coal; the government owns about three-quarters of CIL, which provides revenue to the treasury through dividend payments and taxes on coal production. Coal-producing states are among the poorest in India, and CIL provides significant tax revenue and employment in these areas, making it difficult to transition to renewable energy sources. India’s energy policy currently focuses on bringing affordable power to all homes; India’s per-capita electricity consumption is only 1/3 of the world average, and millions of homes still lack electricity.
In Australia, domestic demand for coal is declining as the country invests more in renewable energy, with $37.5 billion expected to be invested in the next three to five years. However, Australia is a big producer and the largest exporter of coal in the world, last year’s coal accounting for 38 percent of global exports. About 75 percent of the coal it mines is exported mostly to Asia. Last year the country made $42 billion, the second largest national revenue source after iron ore.
Avoiding the most serious damage from climate change requires transforming the world economy within just a few years, according to the United Nations. By 2050, coal as a global energy source must drop from 40 percent to between one and seven percent. “This report makes it clear: There is no way to mitigate climate change without getting rid of coal,” said Drew Shindell, author of the United Nation’s report from last year. Asia’s heavy and increasing reliance on coal could negate global progress toward preventing catastrophic climate change.
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BANKING ON COAL
The cost of renewable energy is falling so fast that it is expected to be consistently cheaper than coal by next year. Solar power costs have dropped nearly 73 percent since 2010. Soon, coal will make no economic sense for its backers. Why, then, is coal use still on the rise in parts of the world? The answer is complicated, but in short, the infrastructure is already there, and there is still a large profit to be made from it.
Starting in 2015, the largest American banks vowed to cut back on lending money to the coal industry. “Bank of America recognizes that climate change poses a significant risk to our business, our clients, and the communities in which we operate. As one of the world’s largest financial institutions, the bank has a responsibility to help mitigate climate change,” said the company in its coal policy statement in 2015. But these statements and trends were made in a different time in a different America. Three of the largest coal mining companies were in bankruptcy, and the United States was signing new pacts to reduce climate emissions. Now, with the coal industry making a small resurgence under the Trump administration, banks have begun re-embracing the industry. While loans are still lower than the rates in 2014 and prior, they have been increasing since their all-time low in 2015. Morgan Stanley, Goldman Sachs, JP Morgan, Bank of America, and CitiGroup combined have issued about $1.5 billion in new coal-related loans last year, according to Rainforest Action Network. “It wasn’t an environmental policy,” said Alex Bozmoski, managing director of RepublicEn, a conservative environmental activism group. “It was financial and risk management policy that was used by communications departments.”
The Trump administration has indirectly influenced banks to re-confide in coal, a trend that was in decline under the Obama administration, when the coal industry was going bankrupt due to the administration’s policies. This shows that the move to stop loans to coal industries was never about helping the environment, it was for PR and financial reasons. Obama-era policies are responsible for the positive trend in renewable energy use in America today. The recent change in financial policies may indicate that these renewable energy trends may also decline in the future.
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THE COMPANY KEEPING ASIA ON COAL
Powerful companies backed by governments are trying to maximize profits before it’s too late. For example, the Adani group, an Indian industrial giant with interests in energy, resources, logistics, agribusiness, real estate, financial services, defense and aerospace, recently acquired long sought-after mining rights in Australia. Their Carmichael project plans to extract coal from Australia, transport it to power plants in India, and sell this power to neighboring Bangladesh. The project would ensure that coal will connect these three economies for decades to come. The company’s founder, Gautam Adani, defended his company in a recent interview: “India doesn’t have a choice,” he said, citing the affordability and reliability of coal. Mr. Adani stated that coal is indispensable to feeding the energy demands of big developing countries.
Regardless of whether coal is actually indispensable to India, Mr. Adani’s army of mines, power plants, and ports depend on it. A huge investment has been made by Mr. Adani to ensure coal remains crucial in India and other countries.
In campaigning for the new Australian mines, the Adani group sold to local Australians this message: India’s need for coal would boost the area’s economy. The group donated to community organizations, made campaign contributions to local politicians, and hired political aides to lobby on the company’s behalf.
The Adani group achieved unusually good deals and help from the state government. In March, it acquired coal mining contracts in a vast and previously off-limits forest. The company also has close ties with Narendra Modi, the prime minister of India. For example, when coal prices rose a few years ago, it put a strain on power companies. In an unusual move, Indian regulators allowed the company to charge its customers more than originally contracted. Last year, India’s Directorate of Revenue Intelligence started an investigation into a $4.4 billion alleged fraud by 40 Indian power companies, including six Adani subsidiaries. The companies allegedly used fake middlemen to inflate the price of coal they were importing from Indonesia. The scheme allowed the companies to charge higher tariffs by exaggerating their production costs, the investigation claimed. The alleged scam would also have allowed the companies to siphon billions of dollars from India into offshore bank accounts, making it difficult for Indian authorities to tax or account for the money. Attempts were made during the investigation to prevent Indian authorities from accessing the Adani group’s business records. While the government lost the case in a customs tribunal, it is now appealing in a higher court, where it accuses the Adani group of obstructing the investigation.
The group’s newest coal-fired plant is being built in the state of Godda, it is where coal from the Carmichael mine in Australia will be burned. The Godda power plant will be part of a special economic zone, the only zone in the country with only a power plant. Other economic zones have factories making duty free products for export. This plant would not provide power to any Indian household. This one would only generate electricity for Bangladesh, a small, densely populated nation to India’s east, allowing the company to escape some taxes.
The land where the plant is being built was once home to India’s poorest farmers. A cell-phone video uploaded to Youtube shows locals pleading with a company representative to spare their land. At one point, several women drop to the man’s feet, crying. Eventually, police came and arrested five men who had refused to give up their land with charges of criminal trespassing.
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AFRICAN COAL
While Africa’s economy has doubled in size since 2000, more than two thirds of people south of the Sahara still live without electricity. Africa has begun to embrace coal because of this. Renewable energy, on the other hand, has had mixed results in Africa. For example, Kenya’s 800 megawatts of hydropower (one third of its total capacity) has become increasingly unreliable due to a recurrent drought and is virtually inoperable at present, according to Richard Muiru, an advisor to Kenya’s Ministry of Energy and Petroleum.
According to data compiled by CoalSwarm, an industry watchdog, more than 100 coal-fired plants are being developed in 11 African countries; this exceeds the region’s existing coal capacity by eight times. Nearly all of these plants are fueled by foreign investment, and roughly half are being financed by the world’s largest coal emitter: China. China has invested in coal projects in eight African countries. Most of these countries have no existing coal power plants or coal infrastructure. Diminishing demand at home has led Chinese state-owned companies to invest overseas. Of the 400 companies worldwide planning to expand coal operations, 161 are Chinese, according to environmental groups, meaning China plans the most new coal power projects globally.
That being said, China’s plan for coal infrastructure in Africa has met strong local opposition; Lamu power station, Kenya’s first planned coal plant, has been put on hold. In response to public concern, a Kenyan court withdrew a key permit for the project, meaning it now lacks a necessary license for construction to begin. Social and environmental risks were cited among the reasons for the license being withdrawn. China’s largest bank, ICBC, was planning to finance $1.2 billion of the $2 billion needed to build the now halted coal plant. A Chinese company, Power Construction Corporation of China, was also contracted to build the plant.
This decision illustrates the growing public concern and awareness, globally, over pollution and climate change. Public interest triumphed here, showing hope for those in similar predicaments.
Mediocre Issue | November 2019