"Coal phasedown" a year on from COP26

Looking beyond gloomy coal headlines towards the acceleration on clean power shows the progress made on coal phasedown in the last year.

Dave Jones

Head of Data Insights


4 November 2022 | 5 min read

Last year at COP26, Alok Sharma pledged to “consign coal to history”, and marshalled all countries in the world to the vague promise of “accelerating efforts towards the phasedown of unabated coal power”.

So heading into COP27, is the global coal phasedown now underway?

This momentous agreement has paradoxically been followed by a year where coal power may hit another all-time high. At first glance, it seems like the focus on a coal phasedown has slipped off the priority list. Since COP26, there have not been any new substantial national pledges that map out coal phase down. Europe is temporarily returning coal units to service to survive Putin’s gas cuts, and China and India are still building new coal power plants.

But this misses the big picture. To understand coal, you need to look at clean power. China’s wind and solar build-out is staggering. The US and Australia have seen step changes in short-term climate ambition. Europe is now committing to phase down gas, as well as phasing down coal. And most other coal-heavy countries are making positive movements that reveal an energy landscape that has changed for good.

There has been a massive step up in clean power investment — and it is clean power that will replace coal power. With the ongoing gas crisis, it’s also more and more clear that gas will not be the bridge fuel that many feared. Rather, we are in the midst of a genuine coal-to-clean transition.

China’s wind and solar growth is in hyperdrive

China is home to over half of the world’s coal generation. The country pledged to peak coal use by 2025, but that could happen sooner.

China leads the world on solar and wind deployment and the scale of the country’s short-term plans is extremely ambitious. When added up, the provincial targets on wind and solar in the 5-Year Plan reach 874 GW to be built across 2021 to 2025. In comparison, the global cumulative installed capacities of wind and solar are 825 GW and 850 GW respectively, as of the end of 2021.

Barring an extraordinary new use for thousands of terawatt-hours of power, that clean power will reduce coal power. 

That’s despite China building new coal power plants. It’s not clear how many coal power plants are being built right now (it might be a lot) but these do not signal a return to coal power at the expense of renewables growth. Rather they are aimed at meeting peak demand. Coal plants will be running much less often, and it won’t be long before the build-up of clean power puts coal into permanent decline. 

That China’s manufacturing is skewed towards exporting clean energy products is another signal of long term direction. This summer, China was exporting $4 billion a month of solar panels alone — placing even more strategic importance on the clean transition for China’s economy.

EU and US look to phasedown coal *and* gas

Many OECD countries are now setting their sights on near-100% clean power grids by 2035.

In the US, this year’s Inflation Reduction Act looks set to unleash a clean infrastructure revolution, turning President Biden’s pledge from early 2021 for “a carbon-free power sector by 2035” into a real possibility. A shift is also underway in Australia, the tenth biggest coal power generator. Following a change of government, the country is now looking to transition its energy mix from 70% fossil fuels in 2021 to 82% clean by 2030. 

In the spring, Canada and the UK moved forward on commitments to a clean power sector by 2035. Likewise in April Germany’s incoming government proposed an ambitious renewables package that targets 80% renewables by 2030 and near-100% by 2035.

These critical step changes in ambition could lead to a near phase-out of both coal and gas power in those countries over the next 13 years. The Netherlands, Portugal, Austria and Denmark are aiming for 100% clean power even earlier, by 2030.

This is important because gas generates more power than coal in most of these countries. In 2021, the US generated 22% of its electricity from coal and 38% from gas. In the UK it was 2% and 40%, in Canada it was 6% and 12%, and in the EU it was 15% and 19%. 

Europe’s response to the energy crisis has been to accelerate the transition to clean power. As of June this year, national plans will see EU countries reaching 63% of renewables share in electricity generation by 2030, up from 55% under previous commitments. 

What’s more, the European Union is set on reducing gas use across the whole economy, not just in the power sector. Its REPowerEU package proposes cutting overall gas use by 56% from 2020 to 2030. 

It can’t be said that coal is making a comeback in Europe. Plans to return coal plants remain relatively limited and temporary. Even if these plants ran throughout 2023, they would generate 60 TWh of coal-fired electricity — enough to power the EU for about a week — resulting in a year-on-year increase in EU power sector emissions of four per cent. 

Coal power in Europe is only likely to be higher in 2022 than in 2021 because of large year-on-year falls in hydro generation caused by 1-in-500-year droughts, and temporarily reduced nuclear generation caused primarily by major outages at French plants. Wind and solar filled part of that gap, but coal was needed to fill the rest. Coal power will likely fall again next year as hydro and nuclear levels recover and wind and solar continue to grow.

Coal at COP27

In the wider pool of coal-reliant countries, there haven’t been many big new headline announcements…. yet. Ongoing discussions have seen countries start to work out what “coal phasedown” means for them, and COP27 may bring more details.

Just Energy Transition Partnerships

Progress has been made with the Just Energy Transition Partnership to provide financial assistance to phase down coal in South Africa, first announced at COP26. An initial financial plan is now agreed. It is likely this model will be copied, at least in part, for other countries as the G7 steps in with funding

Indonesia is likely to announce a deal at COP27, following negotiations over the last 12 months; and potentially also Viet Nam. While India is another candidate for this kind of financing, there are expectations that the country will wait until it hosts G20 next year. However, it’s likely there are discussions already happening behind the scenes. 

The details will be vital; these partnerships could represent critical initial steps towards what will be complex national energy transitions that need international support. They won’t be enough in themselves, but they are a powerful starting point that could spark more momentum.

No New Coal

On new coal, there is also good news. Abroad, China’s coal investments have started to wane, following up on their pledge to “not build coal-fired power plants abroad” made last year. It is likely that more countries will add their name to the “No New Coal” pledge during COP27, in part because China’s financing is no longer available.

Arguably the biggest climate success since the Paris Agreement in 2015 has been the reduction in the global pipeline of new coal power plants by over three quarters. This was a critical step to avoiding some of the worst IPCC scenarios of 4 degrees or more. Putting China’s energy strategy aside, global progress on this is on track, with no backsliding.

2030 ambition

The future of coal phasedown is, in part, determined by how serious countries are about keeping heating to 1.5 degrees.

Perhaps the most critical announcement needed from COP27 is for governments to lay out their ambition for what to achieve through to 2030. Right now, Nationally Determined Contribution (NDC) plans for 2030 put the world on track for global heating of 2.5 degrees. As of the 23rd September, only 24 of the 193 Parties to the Paris Agreement had submitted new NDCs since COP26; though all pledged to provide updates by the end of this year. 

Where does that leave us?

The latest data shows both global coal and gas power generation — and therefore global power sector emissions — are close to setting new records in 2022. How close that might be is hanging in the balance. However, we think it’s unlikely that coal power will rise by 2% this year, as forecast by the IEA

It’s clear that to have kept global heating to a minimum, the step up in clean power investment should have come much quicker. But because electricity generation is a lagged metric, the step change in clean power investment is only just beginning to be reflected in generation and there is a big shift coming.

With maturing industries like solar, growth would be expected to slow down, but it is in fact speeding up. It took five years from 2010 to 2015 to double the amount of solar installed in a year. And then only four years to double between 2015 to 2019. Now the team at Bloomberg New Energy Finance are forecasting 2022 installations will be double those in 2019 – a doubling in just three years. 

Did Russia’s war speed up the transition to clean power? Without a doubt. Fortunately, the answer to the energy crisis is the same answer as to the climate crisis. 

The clean power boom could actually mean a faster phasedown of coal than we might have expected a year ago. And, with gas now in the crosshairs, this means there will be a more sustainable transition from coal into clean electricity, rather than wasting time with gas. And perhaps, for the first time ever, the prospect of an approaching phasedown in fossil fuel power across both coal and gas has emerged.

Supporting Material