7 Criteria for a Credible Coal Phase-Out Plan

The International Energy Agency’s Net Zero Emissions by 2050 Scenario unequivocally states that there is no room in a 1.5°C carbon budget for new coal power plants, new coal mines or mine extensions. And Research from Oil Change International shows that to have even a 50% chance of staying under 1.5°C, nearly 40% of developed fossil fuel reserves must stay in the ground. Companies that are still developing new coal assets are clearly not transitioning.
 

The think tank Climate Analytics published these exit dates in 2019, in its analysis on the Special IPCC Report on 1.5°C. This IPCC report stated that 78% of coal-based emissions must be phased out by 2030, to have a high chance to limit global warming to 1.5°C. The UN Secretary’s climate agenda includes these exit dates as well as the declaration of the Powering Past Coal Alliance, which was signed by 60 national governments and 51 subnational governments. The latest update of the IEA’s Net Zero report also confirms that “high income countries” need to exit coal in 2030 and the rest of the world in 2040.
 

Selling a coal plant or coal mine to a new owner does nothing to reduce emissions. Instead, it only increases risks for local communities, workers and the environment. The successor company may not take responsibility for the environmental damage done by its predecessor or for prior commitments to workers and local communities. To act responsibly, companies must close down their coal assets instead of kicking the can further down the road.
 

Providing a company-level exit date is not sufficient. To phase out coal responsibly, a company needs to provide stakeholders with a detailed and individual closure plan for all its assets. Workers, communities and governments need detailed closure plans to be able to adapt and plan for the future. For the relevant authorities, but also for insurers, investors and banks, a clear timetable is necessary to monitor, if a company is complying with its phase-out commitments.
 

Fossil gas plants have less direct CO2 emissions than coal, but still have immense climate impacts due to methane leakage during the extraction, processing and transport of gas. There is no room in the global carbon budget for the expansion of gas power. The International Energy Agency’s Net Zero Emissions by 2050 scenario states that unabated gas-fired power needs to be effectively phased out in advanced economies by 2035, and in the rest of the world by 2040, as emissions from electricity generation reach net zero.

Any form of fossil fuel-based hydrogen production comes with a high carbon footprint. Conventional “gray” hydrogen is produced from fossil gas using a process called “steam reforming”; “blue” hydrogen is produced with the same process, but with the addition of carbon capture and storage. Scientific research showed that the greenhouse gas footprint of blue hydrogen is more than 20% higher than burning natural gas or coal for heat. Only green hydrogen, which is produced using renewable energy for the electrolysis of water, comes with very low emissions. However, due to its high energy consumption, green hydrogen should be dedicated for industrial processes which are otherwise difficult to decarbonize and electrify, and long-term energy storage.

Converting coal power plants fully or partly to biomass will likely lead to increased emissions of CO2 per kWh as a result of the lower energy density of wood and the immense emissions along the supply chain. And the time needed to reabsorb the extra carbon released can be very long, so that current policies risk exacerbating rather than mitigating climate change. Using biomass at an industrial scale to produce electricity also entails the large-scale destruction of forests and has serious impacts on biodiversity.
 

Companies must commit to negotiating detailed asset-by-asset Just Transition roadmaps with unions, affected communities and local governments. Without extensive planning and rehabilitation efforts, coal plant and mine closures can leave local communities exposed to severe environmental hazards and negatively impact local economies and workers.
 

The threat or use of investor-state dispute settlement (ISDS) mechanisms can have a chilling effect on government coal exit policies. The Energy Charter Treaty (ECT), a legal framework from the 1990s, bypasses national laws and allows companies in the energy sector to sue states for compensation for actions like a state-mandated coal phase out that have supposedly “damaged” investments.

Coal companies have a long history of funding organizations that lobby against climate and environmental regulations, as evidenced in the Coal’s Lonely Lobbyists report by the Climate Investigation Center. Financial institutions must ensure that their clients end all funding for coal industry and anti-climate lobbying groups.