Economic response to COVID-19 risks locking in coal for decades

8th April 2020


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Countries risk being locked into uneconomic coal power for decades if they look to build new capacity once the coronavirus pandemic has passed to stimulate their economies.

That is according to a report published today by Carbon Tracker, which warned that China could be about to expand its coal capacity after announcing that it is ready to relax investment rules.

The financial think tank also unveiled research suggesting that 46% of global coal plants will be running at a loss in 2020, rising to 52% by 2030, with renewable sources outperforming coal worldwide.

Report co-author Matt Gray said that governments should resist any temptation to invest in coal to avoid undermining global climate targets and locking in expensive power costs.

“Building new coal and propping up the existing fleet with stimulus money would be throwing good money after bad,“ he continued.

“Faced with the need to invest billions in their economies and create new jobs, governments should be planning for a green recovery by incentivising the closure of coal and spending on a major expansion of low-cost, clean renewable power.“

The report suggests that 90% of coal capacity which is operating, in construction or planned, is in countries with regulated or semi-regulated markets where coal power generators are subsidised.

By contrast, the findings show that, in deregulated markets, most coal power is already unprofitable on an underlying basis, including 90% in Germany and 82% in the UK as of last year.

This comes after Carbon Tracker released a separate report last month suggesting that it is already cheaper to generate electricity from new renewables than new coal plants in all major markets.

The researchers said that, by 2030 at the latest, it will be cheaper to build new wind or solar capacity than continue operating coal globally.

Despite this, the latest report shows that government subsidies are driving plans to build nearly 500GW of new coal plants at a cost of $638bn (£516bn).

“Governments and investors have a responsibility to navigate a transition away from coal in an orderly way to ensure consumers receive low-cost energy and investors plan for premature closures,“ the report says.

“Policymakers urgently need to deregulate power markets to create a negative investment signal for coal project developers and ensure least-cost power generation technologies are built.“

Image credit: iStock

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