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Coal to clean power transition: How countries responded at COP26

Originally posted in The Daily Star on 8 November 2021

CPD POWER & ENERGY STUDY

UK COP26 Climate Presidency announced Global Coal to Clean Power Transition Statement on November 3. It is a major political non-binding statement where countries are invited to make their commitments on how to phase out coal-based energy use both at home and abroad and promote clean energy use.

Contrary to expectations, the majority of countries did not come forward instantly to sign the statement – only 47 countries have inked the statement till November 5. The major countries that struck the agreement include Canada, Belgium, Chile, Denmark, Egypt, Germany, France, the Maldives, Nepal, the Netherlands, Korea, and Britain.

Among the major coal producer and coal user countries, Indonesia and Vietnam signed the statement. China, Australia, India, Japan, and the US are yet to sign it. It is expected that the countries will come forward to sign the statement in the coming years.

Unfortunately, Bangladesh did not turn up to sign the agreement though it has shown a strong political stance against coal power at the COP26.

What is in the statement?

The statement specified four commitments on coal power generation and clean power promotion. In the background, the statement clarified that coal-based power generation is the single most important reason for temperature rise and recognises the imperative to scale up the deployment of clean power.

The four commitments are: (a) rapidly scaling up deployment of clean power generation and energy efficiency measures to be carried out through the support from the Energy Transition Council (ETC); (b) rapidly scaling up technologies and policies to achieve transition away from unabated coal power generation by 2030 for major economies and by 2040 for other economies through the Powering Past Coal Alliance (PPCA); (c) ceasing issuance permits, new construction and new government support in favour of new unabated coal-fired projects through initiative such as No New Coal Power Compact; and (d) strengthening domestic and international effort to provide a robust framework of financial, technical and social support to affected workers and sectors and communities.

The statement, if agreed by countries under their nationally determined contribution framework, could well be facilitated by phasing out coal and could ensure a strong footing of clean energy. Each of the commitments has been backed by international institutional arrangements, which could extend support to aspired countries to fulfil their commitments.

For example, the ETC will work at least till 2025 to support countries in eight areas: developing integrated energy planning; developing bankable and utility-scale renewables; supporting countries in coal and fossil fuel transition to retire coal plants; developing policy and instruments to attract more private investment for clean energy; upgrading domestic grids to integrate renewables; accessing technologies for renewable energy; and supporting just transition through social dialogue mechanism that would help create new and quality jobs for coal-dependent regions.

Similarly, the Powering Past Coal Alliance (PPCA) is working on securing commitments from governments and the private sector to phase out unabated coal power. At the same time, it encourages a global moratorium on construction of new unabated coal-power plants, shifting of investment from coal to clean energy, and achieving coal phasing out in a sustainable and economically inclusive way.

Bangladesh is associated with the ETC, but it is not a member of the PPCA. Hence, Bangladesh could seek financial and technical support from the ETC with a view to phasing out of coal energy and promoting clean energy.

Commitments on stop financing fossil fuels abroad by 2022

A group of 20 countries and multilateral development banks (MDBs) have committed to stopping financing fossil fuel abroad by the end of 2022. This commitment includes not only stopping funding coal-based power generation but also oil and gas-based power generation. More importantly, it includes diverting the funds to clean energy development abroad.

The countries that signed the pledge include the US, Canada, Denmark, Italy, Finland, Costa Rica and a number of MDBs, including the European Investment Bank and the East African Development Bank. Major Asian countries that invest in fossil fuel abroad, such as China, Japan and South Korea, are yet to sign the pledges. However, China has recently committed to stopping investing in new coal power generation abroad that partly covers its commitment.

Since China, Japan, Korea and India are major investors in fossil fuel-based power generation in Bangladesh, lack of their commitments in signing the pledges would make it difficult for Bangladesh to shift from fossil fuel-based power generation financed by these countries. Moreover, Bangladesh would lose the opportunity to shift the funding of these countries from fossil fuel to clean power generation.

According to an estimate, if the commitment of the countries and MDBs is realised, about $18 billion could be made available for investment in clean power projects globally. Despite the funding opportunities, the required funding for clean power for net-zero carbon emission would be much higher. At least $2-4 trillion per year would be required for low carbon technologies till 2050.

Commitments on domestic coal or fossil fuel use reduction

While countries are making commitments on their role on coal and fossil fuel use or investment abroad, in most cases, they are reluctant to make commitments on their domestic coal use.

China has expressed its willingness to reduce coal use by 1.8 per cent for power generation over the next five years. Similarly, Indonesia, one of the largest coal producers, has made a commitment to ending coal use by 2040. As part of the mechanism, it plans to retire a number of operational coal plants using credit support from the Asian Development Bank.

The Philippines would retire 50 per cent of its coal-fired power plants by 2030-2035. The ADB, under its Energy Transition Mechanism, would provide seed fund to raise low-cost capital for these countries to make it faster to retire coal-fired power plants in Indonesia and the Philippines. Such a financing mechanism could work in Bangladesh to allow early retirement of coal-based power plants that are now in operation or under construction.

Commitments made by Bangladesh

Bangladesh’s prime minister said at the Climate Summit that the plans to build a total of 10 coal-fired power plants have been scrapped.

According to the Bangladesh Working Group on External Debt, Bangladesh has another nine coal-fired power plants that are either in operation or are being constructed with a combined generation capacity of 9,875 megawatts.

The two plants that are in operation – Barapukuria and Payra — would generate 1,845 MW. The rest seven plants with a possible generation capacity of 8,030 MW are at various stages of construction.

Of the under-construction plants, three have progressed at a considerable level: Rampal (80 per cent), Matarbari (60 per cent) and Banshkhali (55 per cent). The rest made little or no progress, with implementation within the range of 0-35 per cent.

The projects are being implemented in either public or private sector with financial support from a number of Asian countries, including Japan, China and India.

In case of phasing out of coal-based power plants, Bangladesh could take a phase-wise approach. Under the approach, the plants that have made limited progress (five plants) could be targeted for retirement at the stage of construction. The rest of the plants could be considered for gradual retirement with the availability of financial support from MDBs or development partners.

Bangladesh could take support of the Energy Transition Council to help provide technical support to phase out the coal-fired power plants. As China has recently committed to stopping investing abroad in new coal projects, it is expected that China-backed Bangladeshi projects will be phased out in the coming years.

In the case of other coal-fired power projects, Bangladesh could take lessons from Indonesia or the Philippines to seek funds from the ADB to retire the projects. Bangladesh could seek technical and financial support from Japan and India in the construction of renewable energy projects.

It is better to put more emphasis on domestic-led initiatives on reducing coal power and enhancing clean energy. In this case, support of the neighbouring countries will supplement our domestic initiatives.

The author is research director of the Centre for Policy Dialogue.