The International Energy Agency forecasts that global coal use will increase over the coming decade. Why is it that coal use persists, despite intensifying efforts of citizens, industry and governments to turn to cleaner alternatives?
Kleinman Center Senior Fellow Anna Mikulska, author of recently published policy paper The Long Goodbye: Why Some Nations Can’t Kick the Coal Habit, talks through the reasons that coal remains attractive, the drivers of growing global coal demand, and about policy solutions that may slow and reverse the trend.
Andy Stone: Welcome to the Energy Policy Now podcast from the Kleinman Center for Energy Policy at the University of Pennsylvania I’m Andy Stone. Coal use in the United States is on the decline with overall consumption down by nearly half over the past decade. Yet the trend of falling demand for coal in the U.S. isn’t reflected internationally. In fact, the International Energy Agency forecasts the global coal use will increase over the coming decade.
Why is it that coal use persists despite intensifying efforts of citizens, industry, and governments to turn to cleaner alternatives? On today’s podcast, I’ll be talking with my colleague Anna Mikulska, who recently published report on the persistence of coal entitled The Long Goodbye: Why Some Nations Can’t Kick the Coal Habit. Anna will walk us through the reasons that coal remains attractive, and what’s driving increase in global coal demand. And we’ll also talk about policy solutions that may slow and reverse the trend. Welcome to the podcast.
Anna Mikulska: Thanks for having me.
Stone: So, I know you have two roles. You’re a senior fellow here at the Kleinman Center and also a nonresident scholar at the Baker Institute for Public Policy at Rice University. Tell us about the focus of your work and research into the coal market.
Mikulska: So I really started looking into coal because it has a lot to do with the two countries that I’m probably the most familiar with: my native Poland, and my adopted country, the U.S. And the country’s could not be could not be different. When it comes to how they approach coal, currently, U.S. nowadays is abandoning coal in favor of natural gas. And Poland is still kind of holding on to coal and keeping it as important part of its energy mix. The consumption is falling in Poland, the country still uses coal to support 50% of its energy use and 80% of electricity is produced from coal.
So, the comparison between Poland and the U.S., made me, of course, think about the underlying reasons. And whether these reasons are idiosyncratic or maybe a systemic. And my analysis really kind of tries to point to the systemic reasons for call us and why in some countries, this coal use can decrease and in other countries, you will see that that they hold on to coal or the use of it increases.
Stone: So despite efforts to wean ourselves off of coal globally, coal use isn’t declining. How much coal are we using? And how much are we likely to use in the future?
Mikulska: I think it’s important to mention that there’s two ways in which we can look at the coal. We can look at the coal use as percentage of energy used, or we can look at the coal as the volume. And many times, what we hear in the media is you know, nowadays we use approximately just below the 30% of coal in the global energy mix. In the future, this will decline.
And this is actually the case we see. We do see declines. But what many people do not mention at the same time that as the energy demand globally increases, lower proportion of coal in the energy mix doesn’t necessarily mean that the volume also decreases. So, as we go actually forward, what we see in the next 20 years is that the volumes actually stayed the same. By staying the same well, this means that also the emissions are likely to stay the same, bearing some you know technological advances and so on.
And if that’s the case, well, then we have a problem. Because what we trying to achieve with the climate action is we trying to decrease emissions, not necessarily proportion of coal, that’s part of our energy mix. We are trying to decrease emission and if the volume stayed the same in the current technological state and the current, you know, at the current level of technology and advancement, well, we are likely to stay at the same emission levels and that becomes a problem.
Stone: So what trends are we seeing in coal use specifically?
Mikulska: So, we see that falling coal use in the developed countries. But this fall in use of coal is actually offset by rising demand in the developing world. Rising living standards drive and demand. The population itself isn’t necessarily the biggest issue, although it contributes. But when it combines with development, from an underdeveloped of an agricultural society, to an industrial society. Well, one of the identifying features. One of the identifying features of this move to an industrial society is enormous increase in energy demand.
And that’s what basically the developing world is going through now, particularly now in Asia, Southeast Asia. But this is what we going to see going further also what we already actually see in Africa, but it’s also gonna be more pronounced going forward, maybe in 20 years or so, when Africa actually develops from a larger base.
Stone: There’s a really interesting online tool that you showed me once is called the Global Coal Plant Tracker that graphically shows the reality of this change, and it’s pretty shocking stuff. So we’ve got falling coal use in developed countries offset by rising demand and developing regions, how does rising living standards also play into this?
Mikulska: So right, it is actually very important, because we do see that that coal use decreases in the developed world, and partially it decreases because of rising standards of life. Because at some level of income, people now are interested not only in a better home, better car, they are interested actually in a better quality of life in terms of not having to breathe in smoke and so on, and they look for, you know, clean water and so on.
So, when the standard of life increases, you know, to very high levels, then you see that the emissions actually can also go down. But also, when you think about the economies, when economies move from the industrial, which the developed countries have been for a while too and more. Based on services, which we do see now in especially we have seen in the developed world. When you think about it, the industrial world is much more energy intensive than the one that’s paid on services.
So developmentally, the developed world is kind of set for decreasing emissions in relations to development level, this is not the case for the developing world. So, the developing world is at the stage where it’s moving from the agricultural society, which uses relatively less energy than an industrial society. So, you have this kind of movement of the standard of life increases. But the increase at this stage, the increase in the standard of life, it means using more energy than less.
So this is very important to kind of see that the reason why we see increase in the developing world increase in use of energy, and then also in terms of use of coal, is because we see that those countries are developing into more industrial societies. In the by that it means that they’re using more energy.
Stone: So, China is by far the largest consumer of coal and that accounts for about half of total global coal consumption. At the same time, I understand that many Chinese coal plants are being closed and plans for new plants are being canceled. How much does this change China’s demand for coal?
Mikulska: Actually, it does. So interesting part about China is that this is the one country in the developing Asia, where we will see the demand for coal decreasing in the next 20 years. That’s what we’ll see in the outlooks by IEA, EIA, and the BP outlook. They all kind of, you know, they might differ in terms of the volumes that they see now versus 2040, for example, but they also decrease coal use in China. And part of it is yes, it is, because of the cancellations of potentially new plants that were planted before or the fact that there is a lot of coal plants that are being closed down.
However, couple of caveats to this. The truth is that the coal plants that China is currently closing are usually old, and inefficient. And often they are actually very close to urban areas, being inefficient, old, they are also impacting the not only the CO2 levels, but the impacting the air quality. Right. So, with the growing middle class, China has faced the demands of cleaner air and so on. And that’s kind of you know, when you have all coal fired power plants, they are being closed. But China, so if you go into the coal tracker, you also see that there’s actually quite a lot coal plants being built.
Stone: Currently in china?
Mikulska: Right, all the cancellations despite of the constellation so if you go there, you can see there’s quite a lot of them being built. Now, a lot of it is further out, away from cities, so they do not directly impact air quality, but they still do impact you know, some of the CO2 levels the more efficient so they not as dirty or they’re not as polluting as the old plants, coal plants, but it doesn’t mean that they not there.
So, part of the you know, lower use of coal, yes, we will see some cancellations of plants, you will see China are relying more on natural gas. But also, you will have new plants that are more efficient. So, they use less call for the same energy that they produce. But it doesn’t mean that they will disappear.
Stone: So in your research, you point out several reason that coal does remain attractive. What are the, you pointed out, three critical areas, what are those areas?
Mikulska: So coal can become attractive on different basis. Sometimes, countries will actually enact policies that will provide support for call for it could be for political reason, right? It could be for electoral reasons. And we’ve seen that
Stone: Primarily jobs, for example?
Mikulska: For example, with for example of jobs, but they often are actually, you know, combined, the jobs are electoral the economic electoral reasons and so on. But that’s when you see the policy kind of movement to either, you know, towards call for the same policy or electoral reasons, the move can be completely opposite, you can move actually away from coal.
And that’s also you’ve seen that, in depending on which country you’re looking at, market is very important, too. So, if coal is the cheaper option, it is more likely that it’s going to be used, of course, this is can be conditional on other elements, and on other considerations, but this can be the case.
So, some of these considerations can be and why probably one of the most important is energy security, right? So if a coal is cheaper, or with coal is the cheapest, and at the same time, is available domestically. Whereas, for example, natural gas is more expensive and has to be imported, then the countries have already two strikes against other sources of energy. Because it is always more secure to have source of energy within your country than having to import it from somewhere else.
Stone: That’s a prime example, Poland’s a prime example. Right?
Mikulska: Right, right. Its opponent is its prime example where energy security considerations are important for keeping coal still, as part of the energy mix. Just because there is very limited or there’s limited natural gas, domestic supplies of natural gas, there has to be brought in until now, a lot of this has been brought in from Russia. There is a really big push now to go away from, you know, from the Russian imports and replace them from with imports from the U.S. From Norway, from Qatar, because they are not as geopolitically driven.
They won’t, you know, they won’t provide as much of geopolitical power to those countries. It’s more diversify and so on. That being said, it doesn’t shelter or, you know, it doesn’t help this country if those imports become very expensive, right. So, this energy security elements brings in the consideration of cost as well. It’s not only geopolitics, it’s also the cost that will matter for energy security, whether a country has an immediate access to energy sources that are, you know, a reasonable price.
Stone: Even in some of the developed countries, we’ve seen some slide back the coal, and I’m thinking here about Germany, which uses coal, or coal uses rising following anti-nuclear backlash that stems in the Fukushima disaster in Japan. Why aren’t we seeing a move toward natural gas as an alternative? Why specifically back to coal? You know, we’re here in the United States, natural gas has been the obvious alternative.
Mikulska: So Germany’s interesting case, and it’s a probably a different case from any others in a way that at the same time, when you’ve seen that backlash against nuclear power, you have also seen that strong move towards renewable energy. What’s called Energiewende, the program Energiewende kind of was, was really focused on how to bring in more renewable power and get rid of fossil fuels altogether. And without nuclear power to compensate, this has become really a problem, because renewables are not sufficient, given their intermittency.
So, you need some kind of a backup power, you need a baseload power. And if you don’t have nuclear that baseload power can be either hydro for renewable wood in which is limited in its own because it really is limited by natural resources like, like rivers within a specific country. It’s coal and it’s natural gas. Coal is available domestically in Germany at relatively low price. Gas is not, which means Germany has to bring it from somewhere else.
Germany does bring in the most of its gas from Russia. In fact, it’s actually Russia’s largest in Europe importer of Russian gas, it has relatively good relationship with Russia. And it’s, you know, the fact that it actually is building a new pipeline against much of what many of the Central and Eastern European countries want that will the pipeline that will bring Nord Stream 2 that will bring more gas from Russia can have shows that Germany will focus on more natural gas.
But there’s just not enough of it at least at this moment. And there’s always gonna be this consideration of if you become too reliant on Russia. Well, does this bring Russia one more economic power in terms of bargaining? And two more geopolitical power? Right, in terms of being able to influence a country politically, based on that country dependence on Russian gas? Germany is more comfortable with it, because it’s a large market in Russia depends on Germany.
Stone: Both sides depend on each other?
Mikulska: So, both sides depend on each other. And I think that’s why in many ways Germany is more comfortable with it. Other countries are not as comfortable and you see this in Poland. Poland has actually said that after the long-term contract expires with Russia in 2022. Starting 2023, Poland would not import any more Russian gas.
Stone: Really? That’s pretty dramatic.
Mikulska: Yes. So that’s, that’s—
Stone: So you can go to coal or expensive LNG imports?
Mikulska: It will not go back to—it will use coal but it will it won’t increase properties use of coal, the Polish company Picnic has already signed, actually enough long term contracts with U.S. companies to supply Poland with LNG, given its domestic, you know, its domestic supply, and potential new supply in Norway. You actually Poland with could actually have more gas than its needs. In 2023. Now, whether this would be cheaper than the Russian gas? Yes and no. Yes. Because it will be probably cheaper. And that’s actually, they already showed that it would be 25% cheaper than what it is now for Russian gas
Stone: Really?
Mikulska: Yes, the prices that are set now in the long-term contract. However, it probably wouldn’t be cheaper than what Russia would offer Poland in 2023.
Stone: Because there are alternatives now?
Mikulska: Russia can undercut any type of pretty much LNG price, because of how cheap it is to produce that gas and how to how cheap it is gonna be, you know, to send it through the already existing pipelines. The thing is, well, Poland, doesn’t seem to want to kind of go for it, based on its previous experience of Russia. So you will actually see bringing in more natural gas. One thing with respect to coal is that this natural gas that’s gonna be brought from U.S. or Norway, or Qatar does not seem to be replacing coal.
So coal is gonna kind of you know, at this moment, the way it’s predicted coal is going to be staying at the same kind of amount with this new gas is gonna do it’s gonna feed into new energy demand, or is going to be potentially sent to other countries that might need that gas, including Ukraine.
Stone: Colleagues of yours at the Baker Institute provided testimony in Congress, where they pointed out that the last great build out of coal in the U.S. took place in the 70s in the 80s. Due to plant lifespan and the need to earn back investment, once you build you’re locked into coal power, potentially for the next 30 or 40 years. Are we seeing a similar danger with coal built out in places such as India today?
Mikulska: There is probably some truth to this. However, you would probably need technological advancement that would make those new power plants that are now being built and they projected to you know, live another 30 to 40 years, you would need some technological advancement that would make those plants, you know, too expensive, right? Because once they built well, then then then it’s just, you know, you already have, you have sunk cost.
So, using them becomes cheaper often compared to other sources of power. Now, if there is another source that can be cheaper than using those plants that already where you’re already, you sank that cost, well, then you can abandon them. For now, it’s probably not the case. But that’s why you actually see that investment, right? People who invest or companies that invest governments that invest in that, they look into their prospects going into next 20 years or 30 years, and say, well, you know, what the prospects are, the way we see it now, is that they will be still economical.
And if they don’t, well, then we haven’t, we haven’t really, you know, lost anything anyways, because we end up with very cheap with other cheap supply, but for now, they do seem economic. And that’s why we see the buildup in the end, and China. Also, because these countries will be developing at a very high, right? Now in U.S., this is a very different, very different environment, because U.S. has domestically available natural gas, that’s cheap, cheaper than anywhere else, pretty much. And it’s cleaner, the coal, so called gets pushed out.
And then there is no point of investing your money. Seeing that this is the case that you will, you will have this cheap gas. And us is also at a different stage of development, we do support for cleaner energy. And I mean, the Green New Deal is probably you know, the kind of more extreme embodiment of that push. But generally, that’s what you kind of expect in the developed world, that the policies and people preferences will be pushing out the dirty fuels like coal. And that’s why the investors are gonna think twice, if they would like to invest in that kind of, in, for example, coal fired power plants,
Stone: You know, going off of what you just said, one of the big one of the perspectives here is that we have in the West United States, the developed world, is that the reason to get away from coal is because of the climate problem, right? And you have written that climate change is a diffuse problem, and therefore may not be a good motivator for change of the energy system. Maybe we think about it here. But in other places, it’s not necessarily so can you explain?
Mikulska: Climate change is very different from the concerns about air quality, right? Air quality will affect people directly. And you can, you can definitely feel the effects of smog on your health and you can measure them much easily, it becomes a more immediate need to, to address it. And it becomes more problematic politically, economically, and so on.
Climate change is different, because it’s the CO2 emissions, we don’t see the CO2 emissions, we don’t feel them, we don’t experience them the way that we experience other emissions that creates not local, it’s and it’s not local, right. So, you know, the emissions that will be emitted in the CO2 emissions that, you know, they go all the way into the atmosphere, and then they just, you know, affect the whole globe, and we don’t really know, you know, how much the emissions from China or India contribute to this or that. And either way, it’s hard to, to kind of to address something that’s so diffuse. And it’s also won’t work right now. Right.
So, when you have smoke created by, you know, by coal fired power plants, it created right now, the same coal fired power plants that creates CO2 emissions, these emissions, this CO2 will work for years. Right. And so it’s not only diffused in space is also diffuse in time. And by that it’s very hard to address it because now you know, you have to find what it means, what real effects it has, how it affects people. And there’s also a whole host of other things that have effect on climate and so on or on weather, and people confuse those very often.
Stone: So, recently on this podcast, one of my guests was Rachel Kyte who’s Chief Executive Officer of Sustainability for all and that’s a unaffiliated organization that his work focuses on reaching the UN Sustainability Goals for energy. And we talked about the challenge of electrifying and reaching net zero emissions when for so many developing countries coal is the immediate scalable solution. Given the challenges that we’ve spoken about thus far, what solutions might make alternatives such as renewables, nuclear, et., more attractive to these countries that are looking towards cheap coal to fuel the expansion of their standards of living?
Mikulska: So I think in many ways the issue is, in that how this question is asked, and I think it actually the question very much exemplifies one of the problems that I see with the way many people do approach climate action. So, one thing that we have to ask is, what is the climate action about? What do we want to achieve by climate action.
And when many people will focus on well how to replace the fossil fuels with renewables, this is not really the goal of climate action. The goal of climate action is actually combating emissions. And this is a very different goal than, you know, replacing one type of fuel with another type of fuel. And if we put a goal of climate action as limiting emissions, then we actually can come up or can arrive on much wider, many more ways in which climate action can be addressed or climate issues can be addressed.
So yes, definitely, it can be addressed by moving to cleaner energy in a way that we understand it now, by moving to renewables. Because renewables do not emit CO2. They problem of them is that they are intermittent that we still haven’t figured out effective or efficient enough energy storage, that can kind of combat this intermittency, and allow, for example, industry to develop on the basis of renewables only without the need for backup power or baseload.
So when we look only into how to, you know, replace fossil fuels with renewable source, we are just looking at one side of the spectrum. When we look at the fact that, you know, going forward, the prediction is that we’ll still be using we as a world, we’re still using a lot of coal, a lot of fossil fuels, that will generate emissions, well, then we are kind of if we only focus on renewables and replacing this, we are almost losing our sight, are losing what reality can very much be, and are not focusing on another set of solutions that could potentially work as well, which is, can we decarbonize?
Some of our all of our use of the fossil fuels are how could we decarbonize it? Or how can we, you know, extract CO2 from the environment to you know, to decrease emissions to decrease the effect that CO2 has on us. And, again, it’s not to advocate one or another or another, it’s actually advocate all of the above. Because we don’t, we don’t know where the next technological advancement is coming from. We are searching. And if we limit ourselves in terms of how much of solutions can we search for? Well, then we might be missing something.
Stone: So let me ask you this, given the high cost of many of these solutions today, alternatives to coal, how do we as rapidly as possible bring the cost of those solutions down to a point where they’re more easily adopted in places as alternatives to call?
Mikulska: Well, for now, we don’t have those solutions yet. And when what would you need when you don’t have solutions? You need R&D. And when you look, you know, across different countries, the countries that have money for R&D or the developed countries, the countries that are developing, they will be less likely to invest in R&D when they have you know, that when they have to cover a lot of expenses and they already have issues with you know with supporting the development supporting their population and so on.
So, we need to kind of look at the developed world as the leader here. And the developed world, probably should not shy away from that, for once developed on the basis of use of fossil fuels, so it has contributed to quite heavily to the level of CO2 in the Arctic. We are we have, we are currently experiencing. And second, it is interested in more sustainable world cleaner environment, combating climate change and so on. Of course, there is this concern about, you know, free riding and so on.
So there’s all there’s has to be a dialogue that will exist between the developed world and the developing countries. And I think a goodwill is a very important part to it. One way to start would be, to make sure that in this dialogue that’s happening between the developed and developing world, we don’t necessarily vilify use of certain fuels, right? Oftentimes, your country, you know, you kind of see this, this narrative where these guys are using or are, you know, the bad fossil fuels, they don’t care. And then you have the oh, these guys are the good guys who are, you know, who are using more renewables.
And I don’t think really, it’s in that good guy, bad guy, you know, that the narrative is not a good guy, bad guy narrative, it’s what countries can do, what their limitations are in terms of introducing renewables or cutting down on car. And if you don’t vilify specific use, and kind of, of coal versus renewables, but look at this from the systemic perspective, that helps the dialogue and helps countries set up specific programs between the developed and developing world and, and, and collaborations that can help going forward. I mean, there is a lot of, while the developing world doesn’t have probably as much fun for any there, the brain resources or that, that they know the resources in terms of people, people resources that are anonymous there.
So why not use those researchers and scientists that you know, who, who live in the developing world, who might otherwise not have the funds to develop their research towards more sustainable, less CO2 intensive future, why not to fund them, and so on. So, that there is a lot of ways in which this can be done, as long as countries kind of step back from identifying something as bad or good, but rather kind of identifying what, what the problems are, what it’s at the root of countries using coal, natural gas and renewables. And when you know what the root is, then it’s easier to kind of figure out of solutions or understand country’s policies.
Stone: You’ve noted a shifting energy dialogue around fossil fuels and climate, what specifically are you referring to?
Mikulska: You can actually see that shift in several regards, you see this shift with respect to how companies, oil and gas companies have been talking about, you know, their future, you’ve seen a shift on that side to, you know, to more sustainable solutions to programs that, for example, limit methane emissions, and so on. Even during this big, you know, conferences, and when I was at the International Petroleum Week in London, earlier this year, actually, people have noted that the energy conference that used to be kind of one where companies would say, oh, we have these new resources, we’re gonna get this much in this much oil out of the ground as much as it’s not natural gas off the ground. Because we have these far these new finds in that area, this actually has changed, you haven’t seen much bragging about this, you actually have seen companies talking about how they gonna adjust to a new, less carbon intensive future and how they’re gonna help going forward.
So that’s one and that’s based on this, which or the change in how stakeholders have been approached climate change. So, you’ve seen the shift in you know, among the stakeholders is the public is a dead you know, the people who hoard the stocks and companies do react to this. Then second, you will see in the different outlooks, you see that change that almost from this kind of to positive attitude, well, you know, what, we can cut our emissions, we can do it, we can, we will be in no time, we will be at the two degrees Celsius that we promised. And in Paris, this has also changed.
We’ve seen that in the newest IEA Outlook in the BP Outlook and also nowadays there’s two studies that have just came out that actually a showing that even if the biggest emitters really radically, like U.S. or China radically cut emissions it’s pretty much almost impossible. Over huge sacrifice on the part of the other countries to reach that two Celsius goal. And this kind of you know, that’s quite pessimistic and maybe to an extent depressing, but it also creates realistic expectation and what and it makes us think what can we do.
So this, this dialogue or this approach is changing on one side, you see the energy industry kind of coming to terms with the fact that the world is changing the expectation not changing, the climate change is much more, much more accepted, in terms of, you know, scientific proofs, and so on. So it’s adapting, but on the other hand, you kind of go away from this too optimistic of a way we can, you can, we can switch to renewables tomorrow, or we can, we can just, you know, if we only want to, we can cut our emissions and so on. While some countries can cut emissions and can bear the cost of thinking about, you know, Europe or U.S. that their populations are wealthier, they can bear the costs of higher electricity costs, and so on.
So we can cut those emissions. This is not the case for many of the developing world where people do still do not have access to any electricity, why are they still cooking on the stove, you know, is that basically poisoning them because they highly emitting and they emit within their own houses. So it’s not as easy. But I think it’s good that we come to terms. And we almost kind of move from the two extremes that we’ve seen more to a middle, which is much more relative based on reality. And I think it’s easier in by that it’s easier to think of solutions that we can actually try to find honor.
Stone: Thanks for talking.
Mikulska: Thank you so much for having me.
Stone: Today’s guest has been Anna Mikulska Senior Fellow with the Kleinman Center for Energy Policy and nonresident scholar with the Baker Institute for Public Policy at Rice University. You can find on us report on coal use, The Long Goodbye: Why Some Nations Can’t Kick the Coal Habit on the Kleinman Center’s website. Our web address is kleinmanenergy.upenn.edu. For updates on research and events from the center, subscribe to our Twitter feed @kleinmanenergy. Thanks for listening to Energy Policy Now and have a great day.
Anna Mikulska
