Quitting coal: US, UK lead race; India, China face budgetary hurdles

Coal-dependent countries around the world face two wickedly interlinked challenges: accelerating the phase out of coal to prevent catastrophic global warming, while sustaining economic prosperity and political support.

As UN Secretary General Antonio Guterres recently said, keeping global warming close to 1.5 degrees requires all new coal investments to stop now with coal phased out in OECD economies by 2030 and everywhere else by 2040.

Energy supply and economic impacts of the war in Ukraine have clearly made these tasks even tougher. But the war has also provided a powerful reminder of the huge strategic and environmental risks of fossil fuel addiction.

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Quitting coal need not end in economic crisis, nor energy shortages. Not quitting coal will certainly end in climate and therefore economic disaster. Researchers have systematically reviewed the policies of nations well down the path of transitioning away from coal, providing guidance on what works.

Demand, supply side policies

Governments quitting coal in a rapid, just and orderly manner have commonly employed a proactive, collaborative and well-coordinated mix of demand and supply-side policies. Key demand-side policy levers include carbon pricing mechanisms; reducing energy consumption and improving energy efficiency. And providing strong financing and infrastructure support for the rapid expansion of renewable energy.

Supply-side policies such as accelerating coal industry closure through removal of subsidies and through direct regulation, taxation and export licensing are also vital. Regulatory actions to overcome the negative impacts of coal on air quality, health and environmental outcomes often play a key role. So too do mission-oriented industry policies driving economic renewal and job creation.

The European Union remains strongly focused on phasing-out coal by 2030. More than USD 92.9 billion has been allocated to strengthen skills and job opportunities in coal-dependent regions. These funds will also help leverage billions of dollars in private sector finance for clean energy infrastructure and technology.

What others are planning

German Chancellor Olaf Schulz recently proposed the German coal phase out date be brought forward to 2030. The German Coal Commission, comprising government, business and union stakeholders has suggested USD 46.2 billion is needed to support coal dependent workers and communities.

Spain has underpinned its ambitious coal phase-out and renewable energy goals with over USD 289 million for Just Transition contracts covering early retirement, re-employment, environmental regeneration and green industry investment and employment goals and strategies.

In Australia, the new Labor government has backed its upgraded greenhouse gas emissions reduction goal with a National Energy Transformation Partnership to coordinate and integrate national and state government energy transition investments.

The government also announced a USD 1.2 billion and Powering the Regions fund to assist traditional and new industries in regional Australia harness the economic opportunities of decarbonisation.

The best transition plan 

The economic and job creation potential of a well-managed transition from fossil fuels to renewables is now well demonstrated.

Employment in renewable energy rose to 12.7 million in 2022, an increase of over 700,000 jobs. The International Energy Agency has estimated that more than 30 million jobs could be created in clean energy, efficiency and low-emissions technologies by 2030.

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Importantly, as ILO Director-General Guy Ryder said, there is a growing focus on the quality of jobs and the conditions of work in renewable energies. The increasing share of female employment suggests that dedicated policies and training can significantly enhance the participation of women in renewable energy occupations and ultimately achieve a just transition for all.

In Germany, collaborative planning and long-term investment in infrastructure; education; environmental technologies; and cultural and service industries has been an essential foundation for economic diversification and job creation in coal dependent regions such as the Ruhr Valley.

In the United States, investment flowing from President Bidens Inflation Reduction Act will create over 550,000 new jobs in industries producing renewable energy. And in Australia, renewable energy think tank Beyond Zero Emissions has demonstrated the potential for low-cost renewable energy to create new export earnings of over AUD$300 billion and over one million new jobs.

The challenge is ensuring those national level economic gains extend to coal-dependent regions where workers and communities are too often left behind.

Workers and communities 

Broad public support for replacing coal depends crucially on communities and workers being convinced that governments and business are genuinely committed to the creation of secure high-quality jobs.

The Paris Climate Agreement asks committed countries to take into account the imperatives of a Just Transition of the workforce and the creation of decent work and quality jobs in accordance with nationally defined development priorities.

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International Trade Union Confederation General Secretary Sharon Burrow reminds us that a just transition will not happen by itself. It requires plans and policies. Transformation is not only about phasing out polluting sectors, it is also about new jobs, new industries, new skills, new investment and the opportunity to create a more equal and resilient economy.

Canada strengthened support for closing all coal-fired power stations by 2030 by working closely with coal dependent communities and provided integrated investment, infrastructure, training and employment packages.

By listening closely to workers, Canada’s 2018 Coal Transition Task Force found deep local knowledge and built local support for its coal exit target.

In Australia, increasing awareness of the inevitability of the closure of coal fired power stations has strengthened support in coal dependent communities like the Latrobe Valley in Victoria and Gladstone in central Queensland for a far more proactive approach to creating new economic futures and opportunities.

Diversification issue

Amanda Cahill, CEO of The Next Economy, says local governments all over Australia in coal regions are taking the reins because they are seeing change now. We are seeing mines that have been approved but not funded. Were seeing early closures of power plants.

The biggest question is, how do you diversify those regional economies? Gladstone is a really great example because there are so many opportunities people are starting to explore. It is not just the renewable energy; it is what we could do with that renewable energy.

It is things like green hydrogen, its manufacturing renewable energy parts, its looking at land use differently. And this is what is happening all over Australia.

Understand and respect national and regional differences

Successful strategies for accelerating the just and well managed phase out of coal need to be informed by clear understanding of the diverse economic and social histories of coal dependent countries and regions.

Countries leading the coal exodus such as the US, UK, Germany, Spain and Canada have often had access to relatively cheap alternatives. And they are able to finance new energy infrastructure and support for workers and communities in coal-dependent regions.

Coal-dependent countries such as China, India and Bangladesh also need to manage rapidly growing energy demand. They face budgetary challenges in financing renewable energy and supporting regional communities.

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That is why developed economies have a strong practical as well as ethical case to help fund developing economies to achieve a rapid and orderly transition.

Coal exporting countries including Australia, Colombia and Indonesia also face tough challenges in generating alternative sources of export income. And overcoming the power of vested interests.

There is increasing awareness in these countries, however, of the potential for low-cost renewable energy to underpin new low emissions export industries such as green steel and green hydrogen.

Making it happen

How do nations turn the rhetoric of just transitions into a reality while sustaining economic prosperity and maintaining political support?

By delivering on the following: Strong, proactive and collaborative political leadership; respectfully engaging coal communities and workers; a well coordinated mix of demand and supply-side policies; transition governance authorities enabling local engagement and accountability; adequately funding re-employment and retraining programs, economic renewal and diversification policies building on regional strengths; mobilising investment at the scale required to create high-quality jobs in just and resilient zero-carbon economies.

(With inputs from agencies)