Coal in the dog­house in Europe but not else­where

The China Post - - BUSINESS - BY MARIE HEUCLIN

Com­pa­nies, banks and in­vest­ment funds, pri­mar­ily Euro­pean, have been com­ing out in re­cent weeks with an­nounce­ments they will halt in­vest­ments in coal, a new front in ef­forts to re­duce use of the highly pol­lut­ing fuel that faces a battle against the hunger for power in emerg­ing mar­kets.

The lat­est move came Fri­day, when Nor­way’s par­lia­ment voted to force its sovereign wealth fund — the world’s big­gest — to pull out of firms that are heav­ily in­volved with coal.

Ear­lier in the week, French en­ergy group To­tal an­nounced it would with­draw from its coal ac­tiv­i­ties, no­tably in South Africa where it is in­volved in the pro­duc­tion and sale of the fuel which is im­por­tant for elec­tric­ity in nu­mer­ous coun­tries around the world.

In May it was French in­surer Axa that said it would pull out 500 mil­lion eu­ros it had in­vested in en­ergy com­pa­nies that gen­er­ate over half of their turnover from pro­duc­ing or burning coal.

French bank Credit Agri­cole fol- lowed by say­ing it would cut fund­ing for coal min­ing projects.

Even the Church of Eng­land, which man­ages some 12.4 bil­lion eu­ros in in­vest­ments, said it would di­vest some 12 mil­lion pounds (US$18.3 mil­lion) it had in com­pa­nies that gen­er­ated more than 10 per­cent of their rev­enue from coal or oil tar sands.

The an­nounce­ments are an im­por­tant devel­op­ment in ef­forts to re­duce the out­put of green­house gasses that are caus­ing global warm­ing.

How­ever it will be dif­fi­cult to counter the fact that emerg­ing mar­ket na­tions, par­tic­u­larly China, rely heav­ing on coal for meet­ing their grow­ing need for elec­tric­ity.

Coal ac­counted for 73 per­cent of the elec­tric­ity pro­duc­tion in China at the end of the last year.

The In­ter­na­tional En­ergy Agency es­ti­mated in De­cem­ber that coal de­mand will con­tinue to grow by an av­er­age of 2.1 per­cent through 2019, even if this is slower than the 3.3 per­cent av­er­age recorded in 2010-2013.

Even if Chi­nese au­thor­i­ties want to re­duce coal use to im­prove air qual­ity, the IEA es­ti­mated that China would ac­count for three-fifths of the in­crease in coal de­mand through 2019.

In­dia Tops US

Other emerg­ing mar­ket na­tions are fol­low­ing on China’s heels.

In­dia, which is in­vest­ing mas­sively to ex­pand its elec­tric­ity out­put, saw coal use jump by 11 per­cent last year af­ter ris­ing by nearly seven per­cent in 2013.

Last year it passed the United States in coal con­sump­tion by vol­ume to ac­count for 74 per­cent of elec­tric­ity gen­er­a­tion.

In­creas­ing re­luc­tance by West­ern banks to fund coal min­ing projects has failed to curb In­dia’s coal drive.

Ear­lier this year In­dia’s Adani Group brushed aside a de­ci­sion by a dozen Euro­pean and U.S. banks not to fund huge coal in­dus­try projects in Australia’s Galilee Basin near the Great Bar­rier Reef, say­ing it had “no bear­ing” on the com­pany.

In ad­di­tion to Asian emerg­ing mar­kets, de­mand for coal is ex- pected to in­crease in Ja­pan and South Korea due to new power plants com­ing on line.

A re­cent study pub­lished in the jour­nal Na­ture said that over 80 per­cent of coal re­serves must be left un­touched un­til 2050 to meet the U.N. tar­get of lim­it­ing warm­ing to 2.0 de­grees Cel­sius (35.6 de­grees Fahren­heit) over preIn­dus­trial Revo­lu­tion lev­els to save Earth’s cli­mate from po­ten­tially cat­a­strophic dam­age.

Price con­tin­ues to play in coal’s fa­vor as min­ing com­pa­nies have cut pro­duc­tion costs.

So far ex­per­i­ments in a num­ber of coun­tries to put a price on car­bon in an ef­fort to har­ness mar­ket forces to en­cour­age ef­fi­ciency and use of less-pol­lut­ing fu­els have largely failed.

But six en­ergy com­pa­nies, which usu­ally op­pose car­bon pric­ing, in the past week pub­licly en­dorsed such schemes.

The call by com­pa­nies came as ef­forts were un­der­way to breathe life into talks aimed at reach­ing a deal on a new U.N. cli­mate pact ahead of a cru­cial con­fer­ence in Paris in De­cem­ber.

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