CoalinNetZero

Transitions

Strategiesforrapid,secureand

people-centredchange

WorldEnergyOutlookSpecialReport

INTERNATIONALENERGY

AGENCY

TheIEAexaminesthe

fullspectrum

ofenergyissues

includingoil,gasand

coalsupplyand

demand,renewable

energytechnologies,

electricitymarkets,

energyefficiency,

accesstoenergy,

demandside

managementand

muchmore.Through

itswork,theIEA

advocatespolicies

thatwillenhancethe

reliability,affordability

andsustainabilityof

energyinits

31membercountries,

11association

countriesand

beyond.

Thispublicationandany

mapincludedhereinare

withoutprejudicetothe

statusoforsovereigntyover

anyterritory,tothe

delimitationofinternational

frontiersandboundariesand

tothenameofanyterritory,

cityorarea.

IEAmember

countries:

Australia

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Canada

CzechRepublic

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Finland

France

Germany

Greece

Hungary

Ireland

Italy

Japan

Korea

Lithuania

Luxembourg

Mexico

Netherlands

NewZealand

Norway

Poland

Portugal

SlovakRepublic

Spain

Sweden

Switzerland

RepublicofTürkiye

UnitedKingdom

UnitedStates

TheEuropean

Commissionalso

participatesinthe

workoftheIEA

IEAassociationcountries:

Argentina

Brazil

China

Egypt

India

Indonesia

Morocco

Singapore

SouthAfrica

Thailand

Ukraine

Source:IEA.

InternationalEnergyAgency

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Foreword

Astheenergysector’ssinglelargestsourceofcarbondioxideemissions,coalisattheheartoftheglobalconversationonenergyandclimate.AllscenariosmodelledbytheInternationalEnergyAgency(IEA)forthefutureofenergysupplyanddemandthatareconsistentwithinternationalclimategoalsfeaturearapiddeclineinglobalcoalemissions.Withoutsuchadecline,itwillbeimpossibletoavoidsevereimpactsfromachangingclimate.

AsournewanalysisinthisWorldEnergyOutlookSpecialReportmakesclear,morethan95%oftoday’sglobalcoalconsumptionoccursincountriesthathavepledgedtoachievenetzeroemissions.Atthesametime,however,thedatashowthattheworldisfarfromheadingdecisivelyinthatdirection.Globalcoaluseandemissionshaveessentiallyplateauedatahighlevel,withnodefinitivesignsofanimminentreduction.Infact,coaluseinsomecountrieshasseenamodestuptickasaresultofthecurrentglobalenergycrisis.Evenifthisistemporary,asouranalysissuggests,itisaworryingsignofhowfarofftracktheworldisinitseffortstoputemissionsintodeclinetowardsnetzero–especiallythenarrow‐but‐achievablegoalofdoingsoby2050.

Thecurrentsituationinenergymarketsunderscoresthehugechallengesofreducingemissionswhilemaintainingenergysecurity.Renewableenergyoptionssuchassolarandwindarethemostcost‐effectivenewsourcesofelectricitygenerationinmostmarkets,butdespitetheirimpressivelyrapidgrowthinrecentyears,theyhavenotyetbroughtaboutadeclineincoal’sglobalemissions.Reducingglobalcoalemissionswhileensuringreliableandaffordableenergysuppliesandtacklingthesocialconsequencesofthischangewillrequireadedicatedanddeterminedpolicyeffortbygovernments.Multiplechallengesremain.Inmanycountries,thewayinwhichmarketsandcontractshavebeendesignedmeanthatcoalplantsareeffectivelyshieldedfromcompetition.Intheindustrialsector,acceleratedinnovationiscrucialtobringtomarketthetechnologiesneededtodrivedowncoalemissionsinkeyareassuchassteelandcement.

Buildingupcleanenergyassetstoreplacecoalisabsolutelyessentialtoreachenvironmentalgoalsandsupporteconomicgrowthwhilesafeguardingenergysecurity.Atthesametime,carefullydesignedpoliciesandgovernmentcoordinationwithotherstakeholderssuchasindustryandlabourorganisationsarefundamentaltoenableworkersandcommunitiestoadjusttochangesaffectingthecoalindustry,whichhasdeeplinkstojobsandeconomicdevelopmentincoal‐producingregions.Thesechallengesareespeciallysignificantindevelopingeconomieswhereelectricitydemandisgrowingrapidly,coalisoftentheincumbentfuelforelectricitygeneration,andindustrialusesofcoalareontherise.Thisisoneofthereasonswhy,iftheinternationalcommunityfailstomanagecoaltransitionsappropriately,Iseearealriskoffracturesemergingbetweensomeadvancedanddevelopingeconomies,whichcouldleadtodamaginggeopoliticalriftsglobally.TherearesomeencouragingsignsofinternationalcollaborationinthediscussionsonJustEnergyTransitionPartnershipswithSouthAfrica,Indonesiaandothermajoremergingeconomies.Butthere’smuchmoretobedonetomatchfundingwithneedsandtomakeprogressonimplementation.

Foreword3

4WorldEnergyOutlook|SpecialReport

ThisSpecialReportisdesignedtoprovidepragmatic,real‐worldguidanceonhowpolicymakerscanachieveareductionincoalemissionswithoutharmingtheireconomiesorenergysecurity.Itsanalysiscoversarangeofpolicyandtechnologyareas,includingthepotentialforcarboncapture,utilisationandstorage.Anditoffersrecommendationstoimprovefinancingforthephasingdownofcoalandtoaddressthesocialandemploymentaspectsofthistransition.Thereportmakesitclearthatthereisnoonesingleapproachtoputtingcoalemissionsintodeclinebutarangeofapproachestailoredtonationalcircumstances.

ThereportbenefittednotonlyfromtheIEA’sunparalleledenergydataandmodellingcapabilitiesbutalsotheinputofaHigh‐LevelAdvisoryGroupofglobalenergy,climateandfinanceleadersthatIconvenedearlierthisyear.ThisadvisorygroupwaschairedbyMichaelR.Bloomberg,theUNSecretary‐General’sSpecialEnvoyforClimateAmbitionandSolutions,andco‐chairedbyArifinTasrif,MinisterofEnergyandMineralResourcesofIndonesia,whichcurrentlyholdstheG20Presidency,andTeresaRiberaRodríguez,DeputyPrimeMinisterandMinisterfortheEcologicalTransitionandtheDemographicChallengeofSpain.Iwouldliketothankthechair,co‐chairsandallthemembersoftheadvisorygroupfortheimportantperspectivesandstrategicinsightstheyprovidedforthereport.

TheIEAisdeeplycommittedtosupportinggovernmentsaroundtheworldastheynavigatethecurrentglobalenergycrisisandseektotackleclimatechange.Ibelievethisreportwillbeavaluabletoolineffortstodesignpoliciesthatsupportsecure,affordableandfairtransitionstocleanenergy.Inparticular,thesocialandemploymentaspectsofthesetransitionsisanimportantandexpandingareaofworkfortheIEA,asreflectedbyourGlobal

CommissiononPeople‐CentredCleanEnergyTransitions,ourCleanEnergyLabourCouncilandourWorldEnergyEmploymentreport.

I’mverygratefulforthededicationandexpertiseoftheIEAteamwhoproducedthisSpecialReportundertheexemplaryleadershipofmycolleaguesLauraCozziandTimGould.Istronglythankandcommendthemforthisvitalcontributiontotheinternationalenergyandclimateconversationatsuchapivotalmoment.

DrFatihBirol ExecutiveDirectorInternationalEnergyAgency

IEA.CCBY4.0.

Acknowledgements

ThisstudywaspreparedbytheDirectorateofSustainability,TechnologyandOutlooksinco‐operationwithotherdirectoratesandofficesoftheInternationalEnergyAgency(IEA).ThestudywasdesignedanddirectedbyLauraCozzi,ChiefEnergyModellerandHeadofDivisionforEnergyDemandOutlook,andTimGould,ChiefEnergyEconomistandHeadofDivisionforEnergySupplyandInvestmentOutlooks.

PrincipalIEAauthorsofthereportinclude:ThomasSpencer(coaltransitions),CarlosFernándezAlvarez(coal),BrentWanner(power),PaulHugues(industry),PeterLevi(industry),ChristopheMcGlade(supply),PeterZeniewski(investment)andTanguydeBienassis(investment).

MainIEAcontributorsinclude:YasmineArsalane(power),BlandineBarreau(justtransitionpolicies),SimonBennett(hydrogen,energytechnologies),JustinaBodláková(historicalcoaltransitions),OliviaChen(employment),YunyouChen(power),LeonardoCollina(industry),DanielCrow(airpollution),DavideD'Ambrosio(datascience,power),AmritaDasgupta(criticalminerals),TomásdeOliveiraBredariol(criticalminerals,methane),DarlainEdeme(geospatialanalysis),EricFabozzi(power),MathildeFajardy(geospatialanalysis),PabloGonzález(investmentandfinance),EmmaGordon(investmentandfinance),AlexandreGouy(industry),LouisHennequin(justtransitionpolicies),PabloHevia‐Koch(investmentandfinance),BrunoIdini(projectmanagement),GeorgeKamiya(criticalminerals),HyejiKim(affordability),MartinKueppers(industry),RachaelMoore(carboncaptureutilisationandstorage),FaidonPapadimoulis(industry),DianaPerezSanchez(industry),RyszardPospiech(coalsupplymodelling),NasimPour(carboncaptureutilisationandstorage),MaxSchoenfisch(power),TiffanyVass(industry),andWonjikYang(data

visualisation).Othercontributorsinclude:CaleighAndrews,MichaelDrtil,LeonieStaasandAnthonyVautrin.

EdmundHoskercarriededitorialresponsibility.

DebraJustuswasthecopy‐editor.

ValuablecommentsandfeedbackwereprovidedbyotherseniormanagementandnumerouscolleagueswithintheIEA.Inparticular,MaryWarlick,KeisukeSadamori,AlessandroBlasi,PaoloFrankl,MasatoshiSuguira,SaraMoarif,BrianMotherway,RebeccaGaghenandTimurGül.

ThanksgototheIEA’sCommunicationsandDigitalOfficefortheirhelpinproducingthereportandwebsitematerials,particularlyJadMouawad,CurtisBrainard,JonCuster,HortenseDeRoffignac,AstridDumond,TanyaDyhin,MerveErdem,GraceGordon,JethroMullen,IsabelleNonain‐Semelin,JuliePuech,ClaraVallois,GregoryViscusiandThereseWalsh.IEA’sOfficeoftheLegalCounsel,OfficeofManagementandAdministrationandEnergyDataCentreprovidedassistancethroughoutthepreparationofthereport.

Theworkbenefitedfromthesupportandco‐operationprovidedthroughtheIEAClean

EnergyTransitionsProgramme.

Acknowledgements5

IEA.CCBY4.0.

HighLevelAdvisoryGroup

TheHighLevelAdvisoryGroupprovidedstrategicguidanceforthisreport.TheopinionsandjudgementsexpressedinthisreportaresolelythoseoftheIEA,butwebenefitedgreatlyfromthetimeandexpertiseofthedistinguishedGroupmembers:

Chair:MichaelR.Bloomberg

UNSpecialEnvoyforClimateAmbitionsandSolutionsandFounderofBloombergLPandBloombergPhilanthropies

Vice‐chair:ArifinTasrif

MinisterofEnergyandMineralResources,Indonesia,currentholderofG20Presidency

Vice‐chair:TeresaRibera

DeputyPrimeMinisterandMinisterfortheEcological

Rodríguez

TransitionandtheDemographicChallengeofSpain

PatrickGraichen

StateSecretaryforEconomicAffairsandClimateAction,

Germany

JonathanWilkinson

MinisterofNaturalResources,Canada

KadriSimson

CommissionerforEnergy,EuropeanUnion

DanielMminele

HeadofthePresidentialClimateFinanceTaskTeam,South

Africa

AhmedSaeed

VicePresidentoftheAsianDevelopmentBank

MafaldaDuarte

CEOoftheClimateInvestmentFunds

AdityaMittal

CEOofArcelorMittal

GaryNagle

CEOofGlencore

GurdeepSingh

ChairmanandManagingDirectorofNTPC

LeiZhang

CEOofEnvisionGroup

Peerreviewers

Manyseniorgovernmentofficialsandinternationalexpertsprovidedinputandreviewedpreliminarydraftsofthereport.Theircommentsandsuggestionswereofgreatvalue.Theyinclude:

RafayilAbbasovSalehAbdurrahmanDougArent

FlorianAusfelderVarunBhargavaAbhishekBhaskarMickBuffier

AsianDevelopmentBank

MinistryofEnergyandMineralResources,IndonesiaNationalRenewableEnergyLaboratory,UnitedStates

DECHEMA

ArcelorMittal

ClimateInvestmentFunds

Glencore

6WorldEnergyOutlook|SpecialReport

IEA.CCBY4.0.

KobenCalhoun

XavierChen

RebeccaCollyer

RussellConklin

DavidElzinga

AndrewFikkers

CodyFinke

NikkiFisher

LaurenFlanagan

DavidFritsch

MichaelHackethal

YuyaHasegawa

LillyH?hn

LiJiangtao

ShivaPrashanthKasina

FranciscoLaveron

PeterMorris

IsabelMurray

LauriMyllyvirta

AndiNovianto

PakYongduk

AndrewPurvis

MauricioRiveros

JustineRoche

AnaBelénSánchez

Hans‐WilhemSchiffer

JesseScott

ChristineShearer

ChrisStephens

RahulTongia

AdairTurner

TomVanIerland

MichaelWaldron

AilunYang

Acknowledgements

RockyMountainInstitute

BeijingEnergyClub

EuropeanClimateFoundation

USDepartmentofEnergy

AsianDevelopmentBank

Glencore

BrimstoneEnergy

Thungela

EnvisionGroup

USEnergyInformationAdministration

MinistryforEconomicAffairsandEnergy,GermanyMinistryofEconomy,TradeandIndustry,JapanFederalMinistryofFinance,Germany

StateGridEnergyResearchInstitute,China

NTPC

Iberdrola

MineralsCouncilofAustralia

DepartmentofNaturalResources,Canada

CentreforResearchonEnergyandCleanAirCoordinatingMinistryforEconomicAffairs,Indonesia

KoreaEnergyEconomicsInstitute

WorldSteel

TheCarbonTrust

WorldEconomicForum

InstitutefortheJustTransition,Spain

WorldEnergyCouncil

DeutschesInstitutfürWirtschaftsforschung(GermanInstituteforEconomicResearch)

GlobalEnergyMonitor

TheCarbonTrust

CentreforSocialandEconomicProgess

EnergyTransitionsCommission

DGforClimateAction,EuropeanCommissionIndependentconsultant

BloombergPhilanthropies

7

8WorldEnergyOutlook|SpecialReport

Thisdocumentandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.

Commentsandquestionsarewelcomeandshouldbeaddressedto:

LauraCozziandTimGould

DirectorateofSustainability,TechnologyandOutlooks

InternationalEnergyAgency

9,ruedelaFédération

75739ParisCedex15

France

E‐mail:weo@

Web:

TableofContents

Foreword 3

Acknowledgements 5

Executivesummary 13

1

Coalincleanenergytransitions21

1.1Whyfocusoncoalemissions? 22

1.2Anewcontextforthenetzeroemissionstransition 23

1.2.1Coalandenergysecurity 23

1.2.2Globalcoaldemandhasbeenstableforadecade 27

1.2.3Emergingmarketanddevelopingeconomiesdominatecoaluse 28

1.2.4Coaluseisdeeplyembeddedinafewsectors 30

1.3Coal‐dependentcountriesandregions 32

1.3.1Countries 32

1.3.2Regions 34

1.4Outlookforcoaldemandandemissions 36

1.4.1Coaldemand 37

1.4.2CoalwithCCUS 39

1.4.3Coalsupplyandtrade 42

1.4.4Greenhousegasemissionsandairpollution 45

2

Coalinelectricitygeneration53

2.1Introduction 54

2.2Overview 55

2.3Recentpolicydevelopmentsandcommitments 57

2.4Ceaseconstructionofunabatedcoalplants 59

2.5Risksoflocked‐inCO2emissionsfromexistingcoalplants 61

2.6Tackleemissionsfromtheexistingcoalfleet 66

2.6.1Repurposeforflexibility 66

2.6.2Retrofitwithcarboncapture 68

2.6.3Retrofittoco‐firewithammoniaorbiomass 73

2.6.4Retirecoal‐firedpowerplantsearlyandconvertsites 75

2.7Scaleupalternativesourcesofelectricity 77

2.8Ensureelectricitysecurity 82

2.9Maintainelectricityaffordability 83

TableofContents9

10WorldEnergyOutlook|SpecialReport

3

4

5

Coalinindustry87

3.1

Introduction 88

3.2Coaluseinindustrytoday 90

3.2.1Regionaltrends 91

3.2.2Coal‐intensiveindustrialapplications 94

3.3Keymeasurestoaddresscoalemissionsfromindustry 97

3.3.1Reducecoal‐relatedemissionsintheironandsteelindustry 102

3.3.2Reducecoal‐relatedemissionsinthecementindustry 109

3.3.3Reducecoal‐relatedemissionsintheotherindustrialsectors 114

3.4Keyactionsforpolicymakersto2030 117

3.4.1Policiestostimulatepromptreductionsinemissions 120

3.4.2Laythegroundworkforrapiddeploymentofinnovative

technologies

121

Financingthecoaltransition125

4.1Introduction 126

4.2Coalinvestmentandfinancing:stateofplay 127

4.2.1Trendsincoalinvestment 127

4.2.2Sourcesoffinance 129

4.2.3Challengesandhurdlesfacinginvestorsinthecoaltransition 133

4.3Coaltransitioninvestmentoutlook 136

4.3.1Cleanenergyinvestment 136

4.3.2Unrecoveredcapitalrisksforexistingcoal‐firedpowerplants 141

4.4Securetheneededinvestmentoutcomes 144

4.4.1Facilitateearlyretirementofcoalpowerplants 146

4.4.2Provideincentivestorepurposecoalpowerplants 156

4.4.3Stimulateinvestmentincoalpowerplantretrofits 158

4.4.4Unlockinvestmentfortransitionsincoal‐dependentindustries 162

Implications167

5.1Introduction 168

5.2Threelessonsfromprevioustransitions 168

5.2.1Transitionsincoaldemandhaveoftenbeenrelativelyquick 169

TableofContents11

5.2.2Economicfactorshavebeenthemaindriversoftransitionsin

coalemployment

171

5.2.3Previoustransitionswerelargelyunanticipated 176

5.3People‐centredtransitions 178

5.3.1Employment 178

5.3.2Justtransitionpolicies 182

5.3.3Affordability 188

5.4Criticalminerals 189

5.4.1CriticalmineralsupplyanddemandintheAPS 189

5.4.2Implicationsforcountriesandminingcompanies 191

Annexes

AnnexA.Definitions 197

AnnexB.References 215

ExecutiveSummary

Asteepdeclineincoalemissionsisessentialtoreachourclimategoals

Everypathwaythatavoidssevereimpactsfromclimatechangeinvolvesearlyandsignificantreductionsincoal‐relatedemissions.Coalisboththelargestemitterofenergy‐relatedglobalcarbondioxide(CO2)–15gigatonnes(Gt)in2021–andthelargestsourceofelectricitygeneration,accountingfor36%in2021,andasignificantfuelforindustrialuse.Comprehensive,integratedpoliciesaddressingemissionsfromallsourcesareessentialforclimateaction,butreducingemissionsfromcoalneedstobeafirst‐orderpriority.

Coaltransitionsrequireaspecialfocusbecauseofcoal’shighemissionsintensity,growingcompetitionfromcost‐effectivecleanenergytechnologieslikerenewables,anddeeplinkstojobsanddevelopmentincoal‐producingregions.Coalissecondonlytooilintheglobalenergymix,andcoaldemand–farfromdeclining–hasbeenhoveringatnear‐recordhighsforthepastdecade.Today’sglobalenergycrisishasledtomodestincreasesincoalconsumptioninanumberofcountries,atleasttemporarily,mainlyinresponsetosky‐highpricesfornaturalgas.Continuedhighcoaluseisoneofthemostvisiblesymbolsofthechallengeofaligningtheworld’sactionswithitsclimateambitions:morethan95%ofcurrentglobalcoalconsumptionoccursincountriesthathavepledgedtoachievenetzeroemissions.ThisWorldEnergyOutlookSpecialReportmapsouthowtoachievearapidreductioninemissionsfromcoalwhilemaintainingaffordableandsecureenergysupplies,andtacklingtheresultingconsequencesforworkersandcommunities.

ThenewIEACoalTransitionExposureIndexhighlightscountrieswherecoaldependencyishighandtransitionsarelikelytobemostchallenging:Indonesia,Mongolia,China,VietNam,IndiaandSouthAfricastandout.Arangeofapproaches,tailoredtonationalcircumstances,isessentialforthepowersector,wherealmosttwo‐thirdsofglobalcoalisconsumed,andintheindustrysector,whichaccountsforanother30%.Thesocialimplicationsareoftenconcentratedinspecificregions:coalminingtypicallyaccountsdirectlyforlessthan1%ofnationalemployment,butaround5‐8%incoal‐intensiveregionssuchasShanxiinChina,EastKalimantaninIndonesia,andMpumalangainSouthAfrica.

Thegeographicalconcentrationofcoalusemarksitoutfromotherglobally‐usedfuels:Chinaaccountsforoverhalfofglobalcoaldemandandtheshareofallemergingmarketanddevelopingeconomiesexceeds80%,upfromhalfin2000.China’spowersector,onitsown,accountsforone‐thirdofglobalcoaldemand.Chinaproducesmorethanhalfoftheworld’ssteelandcement,andsoalsoplaysadominantroleincoaluseinindustry.Duringthisdecade,emergingmarketanddevelopingeconomies’shareofhistoricalemissionsfromcoal‐firedpowergenerationwillovertakethatofadvancedeconomies.

Achievingcleanenergytransitionsonthescaleandspeedrequiredbynationalclimategoalsandtheglobal1.5°Ctargethasdramaticimplicationsforcoal.Ouranalysisconsidershowthenecessarychangescanbeachieved,usingtwokeyscenariosfromtheWorldEnergyOutlook2022.TheAnnouncedPledgesScenario(APS)assumesthatallnetzeropledgesannouncedbygovernmentsaremetontimeandinfull.IntheAPS,globalcoaldemanddrops

ExecutiveSummary13

by70%bymid‐century,alongsidedeclinesinoilandgasofaround40%.TheNetZeroEmissionsby2050(NZE)Scenarioillustratesapathtoachievethegoalof1.5°Cstabilisationintheriseinglobalaveragetemperatures.IntheNZEScenarioglobalcoalusefallsby90%by2050,andtheglobalpowersectoriscompletelydecarbonisedinadvancedeconomiesby2035,andworldwideby2040.

Ifnothingisdone,emissionsfromexistingcoalassets–ontheirown–wouldtiptheworldacrossthe1.5°Climit.

Ifoperatedfortypicallifetimesandutilisationrates,theexistingworldwidecoal‐firedfleetwouldemit330GtofCO2–morethanthehistoricalemissionstodateofallcoalplantsthathaveeveroperated.Therearearound9000coal‐firedpowerplantsaroundtheworld,representing2185gigawatts(GW)ofcapacity;aroundthree‐quartersofthisisinemergingmarketanddevelopingeconomies.CoaltransitionsarecomplicatedbytherelativelyyoungageofcoalplantsacrossmuchoftheAsiaPacificregion:plantsindevelopingeconomiesinAsiaareonaveragelessthan15yearsoldcomparedwithmorethan40yearsinNorth

America.

Industrialfacilitiesusingcoalaresimilarlylonglived:forcoal‐dependentheavyindustriessuchassteelandcement,theyear2050isjustoneinvestmentcycleaway.Averagelifetimesforemissions‐intensiveindustrysectorassetssuchasblastfurnacesandcementkilnsarearound40years,butplantsoftenundergoamajorrefurbishmentafterabout25yearsofoperation.Around60%ofsteelproductionfacilitiesgloballyandhalfofcementkilnswillundergoinvestmentdecisionsthisdecade,whichtoalargedegreewillshapetheoutlookforcoaluseinheavyindustry.Withoutanymodificationtotheircurrentmodeofoperation,theseexistingassetswouldgenerate66GtofCO2emissionsthroughtheirremaininglifetime.

Arapidscale