By Nick O'Malley
As Treasurer Josh Frydenberg urged his colleagues on Friday to adopt a net zero 2050 target – despite defiant foot-stamping by his Nationals coalition partners – the rest of the world spent the week signalling it was preparing to take far faster and more dramatic action: killing the global coal power industry.
Chinese President Xi Jinping’s announcement on Tuesday that his country would cease funding offshore coal-fired power stations might have been a surprise to some. But to those with an eye on intensifying climate diplomacy it was just the latest blow in a concerted effort to rid the world of its dirtiest source of fuel.
“China pulled the rug out from under [coal advocates], and Australia doesn’t have a blocking coalition [at G20 climate talks next month],” said Nick Mabey, a climate diplomacy expert and chief executive of the global think tank E3G.
Mabey believes it is now inevitable that world leaders will agree to support an announcement before or during the COP26 global climate talks in Glasgow in November of the rapid phase-out of coal-fired power.
If Australia or other countries decline to sign on, they’re likely simply be leapfrogged. Announcements will be made without their support.
“The United Kingdom has made it clear [the] Consign Coal to History [campaign] is a priority. For the COP to have any credibility with the public, coal has to go,” he told the Herald and The Age on Thursday.
China’s decision could see $US50 billion withdrawn from the sector according to the Global Energy Monitor think tank. It follows similar pledges earlier this year by Japan and South Korea, and effectively ends global public overseas coal finance.
An E3G report published last week shows that since the Paris Agreement was signed in 2015 the global pipeline of proposed coal power plants has collapsed by 76 per cent. Forty-four governments have committed to no new coal, while a further 40 countries have no projects in the pre-construction pipeline, meaning they are nearing the position of not committing to new coal.
Climate risks have crept from the far future to the boundaries of the basic building blocks of the economy – bonds and 25-year mortgages.
As COP26 approaches, the diplomatic efforts to force more coal out of the global system have intensified.
A key aim is to make sure developing nations can continue to develop without that growth being tied to coal-fired power. Wealthy nations are ramping up efforts to secure finance to help developing nations decarbonise their power systems. United States President Joe Biden’s chief climate Envoy John Kerry visited India, the world’s second-largest coal user, earlier this month for green finance talks with Prime Minister Narendra Modi.
Officials from the UK, the US, France and Germany have been dispatched to South Africa seeking to come to a coal transition agreement with Eskom Holdings, which generates almost all South Africa’s power from 15 coal power plants.
“The developed economies have a responsibility to fund the just transition to a low carbon economy and climate-resilient society Albi Modise, a spokesman for South Africa’s environment department told Bloomberg of the visit.
The weight of money
This apparently sudden effort to kill coal has been a long time coming.
Geoff Summerhayes still remembers where he was the day he realised that opposition to coal power had slipped off the streets and into the boardroom.
It was 2017, and the then chairman of the United Nations’ Sustainable Insurance Forum and a board member of the body that polices Australian banks, the Australian Prudential Regulation Authority, was at a conference in Kuala Lumpur. He was passed a chart from a Fortune magazine on California’s efforts to rid its pension funds of coal. It showed the collapse in value of the Dow Jones coal index between 2010 and 2015 of 93 per cent. Over the same period the general index, the S&P 500 had grown by 75 per cent.
“It was a lightbulb moment,” Summerhayes says. One moment coal power seemed an immutable and indispensable fact of the modern economic system. The next it seemed it was already half dead.
Like many in the financial sector, Summerhayes sees a 2015 speech by Mark Carney, then governor of the Bank of England and chairman of the UK’s Financial Stability Board, as a pivotal moment.
After outlining the undisputed facts of global warming in an address to the insurance market, Lloyds of London, Carney said, “Climate change is the tragedy of the horizon. We don’t need an army of actuaries to tell us that the catastrophic impacts of climate change will be felt beyond the traditional horizons of most actors – imposing a cost on future generations that the current generation has no direct incentive to fix.
Former governor of the Bank of England, Mark Carney.Credit:AP
“The horizon for monetary policy extends out to two to three years. For financial stability it is a bit longer, but typically only to the outer boundaries of the credit cycle – about a decade. In other words, once climate change becomes a defining issue for financial stability, it may already be too late.”
The speech reshaped attitudes in the financial and corporate sectors, Summerhayes says. It convinced many that climate risks had crept from the far future to the boundaries of the basic building blocks of the economy – bonds and 25-year mortgages.
It also shifted the culture in those circles. Executives and board members who had been growing alarmed by climate science were emboldened to raise their concerns without fear of appearing like some sort of radical.
On his return from Kuala Lumpur, Summerhayes made a speech on behalf of APRA warning Australian financial institutions that the market was turning on fossil fuels. ”The Sustainable Insurance Forum’s view, which APRA shares, is that climate change and – here’s the crucial bit, society’s responses to it – are starting to affect the global economy,” he said. “What I can tell you with absolute certainty is that the transition to a low-carbon economy is underway and moving quickly.
“The weight of money, pushed by commercial imperatives such as investment, innovation and reputational factors are increasingly driving that shift rather than scientists or policymakers.”
Similar concerns were echoing around the world. A month after Summerhayes’ speech, a group of eight central bankers and supervisors formed the Network of Central Banks and Supervisors for Greening the Financial System. Summerhayes was the Australian representative. Its goal was to help drive the shift to a green economy and manage current risks, and today it has 95 members, including the US Federal Reserve.
Another milestone was passed in mid-January 2020 when Larry Fink, chairman of BlackRock, the US investment management goliath that then had US$7 trillion in assets under management, signed two letters.
One was to chief executives of firms around the world who might want a taste of BlackRock’s investing might. Climate change, he warned them, “has become a defining factor in companies’ long-term prospects”. In the second he told BlackRock’s clients that the firm was in the process of pulling investment from companies that depended on thermal coal – the coal used to generate electricity – for more than a quarter of their revenue.
BlackRock has maintained its climate stance and today has $US9.5 trillion in assets under management.
One man who has kept a forensic eye on the flight from thermal coal is energy economist Tim Buckley with the Institute for Energy Economics and Financial Analysis, a pro-renewables think tank with a global reach.
Buckley keeps a spreadsheet on which he marks the announcements of financial institutions, private and public banks, as they exclude coal from their loan books. As of September 17, the list includes 180 names.
Australia remains unmoved
With the private sector running fast from coal, the role of government-backed institutions in financing new coal plants became even more significant, which is why Xi’s speech to the UN on Wednesday was so significant.
“China will step up support for other developing countries in developing green and low-carbon energy, and will not build new coal-fired power projects abroad,” Xi told the UN General Assembly.
“When China moves, the world changes, dramatically,” says Buckley.
As institutions turned against coal, a range of reports and initiatives from institutions around the world only spurred them on. In May, the International Energy Agency – an organisation long criticised in climate circles for its fossil fuel ties – released a report saying there could be no investment in new coal, oil or gas projects from this year if the world was to meet the goal of holding warming to 1.5 degrees.
Also in May, the G20 debated for the first time a push to phase out coal power by 2030 in wealthier nations. Most parties supported the effort, while China, Russia, India, Turkey and Saudi Arabia were among those who defended fossil fuel.
In June, the NSW treasury predicted that the Australian export coal industry would die in 20 years.
Earlier this month the United Nations top climate official Selwin Hart urged Australia to have a “more honest and rational conversation” about the urgency of abandoning coal power, while last Thursday the Reserve Bank published a report predicting that if the world succeeded in its climate goals Australian coal exports would fall by 80 per cent by mid-century.
So far, the Australian government remains unmoved.
“The future of this crucial industry will be decided by the Australian government, not a foreign body that wants to shut it down, costing thousands of jobs and billions of export dollars for our economy,” said Resources Minister Keith Pitt in response to Hart.
In his view, the Australian export thermal coal industry has a long and healthy future.
“The future of this crucial industry will be decided by the Australian government,” Resources Minister Keith Pitt says.
“Both Australian metallurgical and thermal coal are currently at record prices as demand for our premium product soars,” he told the Age and the Herald.
He said the IEA had shown new coal plant technology combined with carbon capture and storage could reduce coal-fired power emissions by 90 per cent.
“For as long as the world wants baseload power, it will need coal until proven alternatives are developed which is yet to happen.”
A baffled world
“He’s talking through his hat,” says Bill Hare, director of Climate Analytics, a global climate change think tank. According to Hare, who closely follows climate diplomacy, whatever happens at COP26, the pressure on Australia will only ratchet up in global forums year after subsequent year.
We are now in an era when the world’s most powerful diplomatic and financial institutions and forums are determined to kill coal off, he says.
Summerhayes agrees. Key players in the financial markets are paying attention to hard scientific data and are unmoved by the demands of politics.
“This is the great challenge of our time. We’re not talking just about stranded assets or fortunes to be made in the transition, we’re talking about the future of humanity itself,” he says.
Less than a fortnight ago the US treasury announced it would co-sponsor an OECD proposal to end financing for coal power, joining Canada, the European Union, South Korea, Norway, Switzerland, and the United Kingdom as co-sponsors. Italy, COP26’s co-host, will ensure the matter is discussed at pre-COP meetings in October as well as at the G20 talks.
The Powering Past Coal alliance, which counts 41 national governments as members, is ready to maintain pressure on the sidelines of the COP26 talks.
Australia’s political resistance to this new reality is increasingly confounding international observers, especially given that new renewable energy is now considered by the IEA to be the cheapest energy source in human history.
Chris Littlecott, lead author on E3G’s report on the collapsing coal pipeline, said international observers find Australian politicians’ resistance baffling.
British PM Boris Johnson: “we must go further and faster”.Credit:AP
“We see this tremendous juxtaposition between Australia’s huge opportunity to be a major winner out of the transition and its politics.” he said, listing Australia’s advantages in space and sunshine for renewable energy and in mineral resources for the development of green steel and aluminium production.
“The capture of the political imagination by the coal export industry, that’s the embarrassment for Australia,” he says. ”Seeking to put money in now to keep old coal power plants operating when they’re constantly falling over is just ridiculous. It really is ridiculous.“
Boris Johnson made his final pitch to a global audience before COP26 begins with a speech at UN General Assembly on Thursday, listing the climate catastrophes that have already struck and those to come.
“If we are to stave off these hikes in temperature we must go further and faster.
“We need all countries to step up and commit to very substantial reductions by 2030, and I passionately believe that we can do it by making commitments in four areas – coal, cars, cash and trees.”
Most Viewed in Environment
Source: Read Full Article