With days left to go at COP26 in Glasgow, opinion on whether the climate summit has achieved anything meaningful or simply produced more hot air remains divided. But one positive development from last week’s events, at least, came Thursday, when over 40 countries signed the Global Coal to Clean Power Transition statement, pledging to cease approval for new “unabated coal-fired power generation.”
“This is a de facto ban on coal power generation,” says Chris Littlecott, associate director at climate think tank E3G.
The power sector is responsible for 30% of global carbon emissions and stripping the industry of coal—one of the world’s most prolific and carbon-intense fuel sources—is fundamental to averting the worst consequences of climate change.
But the Coal to Clean Power pledge’s ban on coal is only “de facto,” because it is not direct. Instead of banning coal, the pledge bans “unabated” coal projects—a caveat that allows for investment in projects equipped with carbon capture and storage (CCS) technology to continue.
However, Littlecott isn’t concerned by that caveat.
According to Littlecott, regulatory systems prevent many governments—or, certainly, the British government, which spearheaded the Coal to Clean initiative—from outright banning coal power. Doing so would open an avenue for industry groups to sue the government for impinging on their business.
Instead, slapping an “abatement” requirement on coal production forces coal plants to either pay for expensive CCS equipment or exit the business. And since coal power is already more expensive than renewables and gas, few energy providers will opt for making the extra investment.
“The U.K. already did this in 2009, when it legislated there’d be no new coal power without CCS attached,” Littlecott says, noting the decree resulted in energy providers scrapping 15 gigawatts of planned coal-power capacity because they couldn’t make the projects economical and include CCS. The legislation “called the bluff of the coal and utility sector companies who were previously calling for CCS but not actually wanting to do it in practice.”
Of course, some of the world’s leading suppliers and buyers of coal, including China, India and the U.S., didn’t sign the pledge. Observers hadn’t expected them to. China has its own plans for coal reduction, India is in the midst of a coal supply crisis, and the U.S. coal lobby is too fierce.
The absence of those three major players were counterbalanced by the assent of Vietnam, Poland and South Korea—the first a major growth market for coal, the second a coal-dependent state in the heart of the European bloc, and the third a leading financier of international coal projects.
However, the Coal to Clean Power pledge’s “abatement” clause does allow some wiggle room in how strictly each signatory follows their commitment. The pledge doesn’t specify what level of emission reduction is sufficient for a coal-fired power plant to count as “abated.”
The regulatory framework each signatory now builds to define what counts as abated will now be significant. But Littlecott—who has been tracking the sector for 15 years—remains “very encouraged by what came out last week.”
“I am relaxed about the inclusion of the word unabated,” Littlecott says. “I see this as a bluff calling exercise.”
Eamon Barrett
eamon.barrett@fortune.com
@eamonbarrett49
CARBON COPY
Green screen
The Monetary Authority of Singapore will stress test local banks for resilience to climate-related risks, starting next year, as the financial watchdog says it is cracking down on “greenwashing” in the sector. The financial enclave is catching up with the U.K., Europe and Canada, where central banks have tested the sector's exposure to climate change already. Local regulators will require all companies listed on the Singapore exchange to publish climate-related disclosures next year, too. Bloomberg
Loans for loans
China’s central bank, the People’s Bank of China (PBOC), said Monday that it will lend local banks money to aid the financing of emission reduction projects—issuing loans to banks so they can issue loans to businesses. The PBOC will lend a bank up to 60% of an approved loan, at a rate of 1.75% interest. The PBOC didn’t estimate how much financing it will distribute through its new policy, but Goldman Sachs predicts the tool will provide $188 billion of liquidity in the next year. Caixin
Driving change
Early reports suggest four of the world’s five largest auto makers—Toyota, Volkswagen, Renault-Nissan and Hyundai-Kia—have refused to join a global pledge that commits signatories to eliminate new car emissions by 2040. The pledge, part of ongoing negotiations during the COP26 summit, is due for publication Wednesday. According to the Financial Times, the U.S., China and Germany are refusing to sign, too. FT
Sellout
Mining giant BHP has reached a deal to divest up to $1.35 billion from two coal mines in Australia, following a trend of mineral suppliers offloading maturing coal assets. Demand for coal has fallen alongside declining prices of alternatives, such as renewables and gas. Still, BHP plans to remain in the coal business for decades yet. It is shifting focus from mining coking coal—used at power plants—to metallurgical coal, which is used to heat furnaces at steel mills. FT
IN CASE YOU MISSED IT
One of the biggest obstacles to America’s energy transition is its woeful power grid, says Iberdrola CEO by Katherine Dunn
The airline industry pledges to get to net zero by 2050—but it’s already running out of time by Dan Catchpole
How CEOs can respond to the ‘Code Red’ of the climate crisis by Nick Studer
Nancy Pelosi says the ‘climate crisis is a national security matter’ to defend Pentagon budget increase by Sophie Mellor
Rolls-Royce sees the future of net-zero energy in small nuclear reactors—and it’s got growing competition by David Meyer
CLOSING NUMBER
2.4C
The world is on course for a 2.4C temperature rise by the end of the century, independent analyst Climate Action Tracker (CAT) says, as negotiations continue at COP26. Last week, a researcher at Melbourne university reported that the numerous long-term pledges coming out of COP26—such as India’s goal to be net-zero by 2070—would keep global temperature rises to 1.9C by 2100. But CAT’s analysis is based on short-term goals governments have announced, suggesting countries aren’t doing enough to hit their own net-zero targets on time. CAT’s 2.4C prediction is well above the 2C temperature increase the world’s scientists have warned humanity needs to remain “well below” in order to avert catastrophe.
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