Carbon Pricing Vital To Avoid Coal-Powered Climate Catastrophe

Carbon pricing, omitted as an obligation from the 2015 Paris Agreement, is the best way to wean the world off coal-powered energy and must be introduced immediately, concluded a panel of experts gathered in Davos to chart the transition to a clean energy future.

If the world is to have any chance of meeting the Paris targets, “there is simply no space for any new coal … we also need the early retirement of existing coal,” argued Christiana Figueres, Convenor, Mission 2020, Switzerland, the former Secretary-General of the UN Framework Convention on Climate Change.

Although the solution to replacing coal power is a mix of gas, nuclear and renewables, this will not happen without levying a realistic cost per tonne of CO2 emitted. “As long as we don’t have a price on CO2, there is no way that gas will overcome coal,” said Patrick Pouyanné, Chairman of the Board and Chief Executive Officer, Total, France. He pointed to the experience of the United Kingdom, which imposed a carbon tax of $20 per tonne – within two years the industry had shifted from coal to gas. “This would give a strong push to the energy industry to invest,” said Pouyanné.

In contrast, Oleg V. Deripaska, President of RUSAL, Russian Federation, one of the world’s largest aluminium manufacturers, stated that “renewables are an excuse for some countries to use more coal.” The suggestion is that, while countries could be seen to be investing in more renewables, they would also need to expand coal power to make up for the current unreliability of renewable energy.

The fact remains that many countries are still heavily dependent on coal-powered energy, including the US, Germany, India, China and Japan. Moreover, coal remains cheap and plentiful as a raw material. And, as Pouyanné pointed out, the public expects energy that is not just clean, but also reliable and affordable. Economic and human development depend on a steady energy supply – an obligation that energy companies and governments alike have to take seriously.

In China, coal represents 61% of the total energy mix and it will remain the dominant energy source for some time to come. “To get rid of coal immediately is quite infeasible in China,” said Nur Bekri, Minister of the National Energy Administration of the People’s Republic of China. Nevertheless, China is reducing the percentage of dependence on coal year by year, as well as investing in cleaner and more efficient ways of using that coal to produce power. At the same time, China has emerged as the world leader in renewable energy, with 150GW of installed wind power.

Pointing to the example of China, Ignacio Sánchez Galán, Chairman and Chief Executive Officer of Iberdrola, Spain, argued that solar and wind can compete with gas, oil and coal. His company has closed most of its coal plants, invested in renewables and still managed to quadruple its profits. The cost of building a new coal-powered energy plant is three or four times higher than building an equivalent renewables plant. The bottleneck now for renewables is not power generation, but a shortage of efficient transmission networks.

Among many other priorities identified by participants to help the world close in on the Paris targets are:

  • Better energy storage solutions to make renewable energies more profitable
  • Greater emphasis on energy efficiency to change public consumption patterns
  • More investment in protecting tropical and boreal forests, which act as vital carbon sinks to store CO2

Separately, the Forum’s System Initiative  on Shaping the Future of Energy engages public and private sector stakeholders to enable an effective and affordable transition to a more sustainable global energy system. With increased commitments to tackle climate change and local sustainability issues, energy is at the crux of the challenges and solutions. The System Initiative therefore focuses on accelerating sustainable energy innovation and deployment as well as on decarbonizing fossil fuels.

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