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Why coal is still too sexy

January 16, 2020

Siemens' support for Adani's coal mine in Australia has outraged environmentalists, but it's not a unique case. Hundreds of companies and countries around the world are planning to expand their coal activities. But why?

Indien Kohlekraftwerk
Image: Getty Images/AFP/S. Panthaky

An estimated 500 tankers a year will travel back and forth between Australia and India in the future. Fully loaded with coal, they'll sail right through the Great Barrier Reef, the largest coral reef in the world, which is already under threat.

And that's just one reason why environmental activists are outraged by Indian Adani Group's plans for mining coal. Once completed, its Carmichael mine in the northeastern Australian state of Queensland will be one of the largest in the world, emitting 705 million tons of carbon dioxide (CO2) into the atmosphere each year, according to climate protection alliance Fridays for Future.

But Adani Group is by no means the only one currently expanding its coal activities — activities that a number of countries around the world are welcoming with open arms. According to the German human rights and environmental organization urgewald, China currently has the largest development plans for coal-fired power plants, with more than 226,000 additional megawatts in the pipeline. Not far behind are India, Turkey, Vietnam, Indonesia, Bangladesh, Japan, South Africa and the Philippines.

Along with other non-governmental organizations, urgewald has compiled a Global Coal Exit List, which it says is the world's most comprehensive database of companies doing business with coal.

Read moreThunberg calls on Siemens to nix Australia coal mine project

Great Barrier Reef
Environmentalists worry about the impact of shipping coal through the threatened Great Barrier Reef Image: picture-alliance/Imaginechina

Coal power easier to handle than wind

Coal-fired power plants are being built above all in places where the demand for electricity is growing rapidly, says Jan Steckel, head of the Climate and Development working group at the Mercator Research Institute on Global Commons and Climate Change (MCC).

He says that especially in emerging and developing countries, there's not enough confidence in renewable energies, whereas carbon technology is seen as familiar and easy to use.

"We mustn't forget that renewable energies need a completely different infrastructure than coal technology. In Germany, we have experts who can calculate how much electricity is needed, when and where it's needed, and collate that with wind forecasts, for example," Steckel says.

But this kind of expertise is often lacking in emerging and developing countries, he adds. And that's why decision-makers are reluctant to commit to renewables.

Read moreBye bye lignite: Understanding Germany's coal phaseout

"With coal, everything is much simpler — there's no need for equalizing storage, and you have the electricity you need exactly when you want it," Steckel says.

Another point in coal's favor, he says, is the high capital cost that emerging and developing countries have to shoulder: "In Vietnam or Indonesia, interest rates on loans are around 14%."

As a result, the initial financing costs are enormously high, he adds, and because it's cheaper to build a coal-fired power plant than a wind farm with an equivalent capacity, coal seems like the clear choice.

"The fact that wind blows for free, but coal has to be bought, is only factored into the calculation much later on," Steckel says.

A wind farm in Kenya
High costs are a barrier for developing countries hoping to invest in renewable energyImage: NDR

Investors from industrial countries

According to the MCC, there are 256 coal-fired power plants with a capacity of 246 gigawatts being built worldwide, as well as another 359 power plants with a capacity of 311 gigawatts in the planning phase. These plants would emit almost 2200 million tons of CO2 each year — and that's with optimized plant technology.

By comparison, the 77 coal-fired plants in Germany currently have a capacity of 45 gigawatts and emit almost 226 million tons of CO2 per year.

Although many of the coal-fired power plants are being built in Asia, the profits will be earned all over the world. Steckel says many of the investors attached to these projects come from the industrialized countries of North America or Europe, and this is confirmed by urgewald's data. Of the 99 coal companies operating in Indonesia, 63 have headquarters abroad, the NGO says. Despite its climate-friendly messages, BlackRock is the world's largest institutional investor in coal plant developers.

According to Steckel, banks such as Britain's Barclays Bank or France's Societe General are also involved in the global coal business.

"As long as a credible climate policy, such as a CO2 price, is still a long way off, it's worth investing in coal, from a purely financial point of view," he says.

Coal being transported along a river in Indonesia
The Indonesian town of Kalimantan is the world's largest exporter of thermal coalImage: Getty Images/E. Wray

'Coal is dying — but it's dying too slowly'

About 400 companies on the Global Coal Exit List — more than half of those in the database — are currently expanding their activities in the coal business, urgewald reports. The NGO is calling for backers to deprive the industry of money and political support.

"Coal is dying — but it's dying too slowly given the climate crisis," says Regine Richter, who is responsible for financing energy projects at urgewald. "There are still too many investors giving money to coal projects."

Some financial investors have, however, recognized that coal has no future, Richter says, because of mounting climate policy pressure and because coal isn't competitive with renewable energies in the long term. This is particularly evident in the case of Adani's mining project in Australia, she adds.

"After years of searching, Adani is still finding sponsors and other supporters to back its construction plans," Richter says. "But more than 60 investors, banks, insurers and suppliers have previously said no, and Adani has had to self-finance much more than initially planned."

Read moreOpinion: Why Siemens cannot pull out of the Adani coal mine

Infographic showing how coal gets from Australia to India

'Coal is a dirty business'

Apart from climate concerns, Adani's plans raise a number of other tricky issues. Environmentalists believe the Carmichael mine would swallow billions of liters of precious groundwater in an already dry region. The current bushfire crisis shows just how severe the drought facing Queensland is.

Critics say the mine would also destroy the habitat of endangered animals and indigenous peoples' traditional land.

"Coal deposits are often located on land belonging to indigenous peoples," says Ivonne Bangert of the Germany-based Society for Threatened Peoples. "Their economic existence is not only threatened by exploitation, but they are also robbed of their identity, because culturally they have a very strong connection with their land."

With the Adani project, this impact is playing out on two continents, says Bangert. In Australia, the Wangan and Jagalingou peoples have been disregarded, she says, while in India, the Adivasi rural population has been driven from their fertile farmlands to make way for Adani's power station in Godda, in the northeastern Indian state of Jharkland. The Godda plant, still under construction, is where coal from Australia is to be converted into electricity.

On top of that, Bangert adds, important mangrove forests were cleared during the construction of Adani's new coal port at Dhamra, on the Indian coast, despite pleas from environmental groups.

"Coal is a dirty business," says Bangert — and she's not just talking about CO2 emissions.